When External Costs Result from the Production of a Good

question 45

Multiple Choice

When external costs result from the production of a good,

• A)Producers have an incentive to produce too little.
• B)Consumers have an incentive to consume too little.
• C)Both producers and consumers have an incentive to produce and consume too much.
• D)Producers and consumers are not affected.

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Definitions:

Destructive Stress

Stress that exceeds an individual's ability to cope and can lead to health problems or decrease in performance.

Dysfunctional

Not operating normally or effectively; causing negative effects.

Production Costs

The costs associated with producing a product or providing a service, which encompass labor, materials, and overhead expenses.

Marginal Cost

The extra expense resulting from the production of a single additional product or service unit.