Refer to the Above Supply and Demand Graph

question 47

Multiple Choice

Refer to the above supply and demand graph. S₁ and D₁ represent the current market supply and demand, respectively. S₂ and D₂ represent the socially optimal supply and demand. The positions of the graphs indicate that there is (are) :

• A) External benefits from production and external costs from consumption of the product
• B) External costs from production and external benefits from consumption of the product
• C) External benefits from production and consumption of the product
• D) External costs from production and consumption of the product

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Definitions:

IRR

Internal Rate of Return; a financial metric used to gauge the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.

Profit Margin

A financial measurement that calculates the percentage of profit a company makes from its total revenue.

Profit Margin

A financial metric expressing the percentage of revenue that exceeds costs and expenses, indicating a company's profitability.