Oftentimes, the Socially Optimal Quantity for a Product That Imposes

question 131

Multiple Choice

Oftentimes, the socially optimal quantity for a product that imposes external costs on the society is not zero, but something greater than zero. This is because completely eliminating the externality would involve:

• A) A much greater marginal benefit than marginal cost
• B) A much greater marginal cost than marginal benefit
• C) Having shortages in the market
• D) Having surpluses in the market

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Definitions:

Production Costs

The total expense incurred in manufacturing a product or providing a service, including materials, labor, and overhead costs.

Manager Experience

The accumulated knowledge, skills, and competencies that an individual acquires through holding managerial roles over time.

Least Cost Combination

An economic principle where firms seek to minimize production costs by using the most efficient combination of resources.

Inputs

The resources used in the production process, such as labor, raw materials, and capital equipment.