When an External Cost Exists in the Production of a Good

question 260

Multiple Choice

When an external cost exists in the production of a good, firms tend to

• A) under-produce the good since society pays these costs.
• B) over-produce the good.
• C) keep production constant throughout the year.
• D) under-allocate resources to the production of the good.

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Definitions:

Compound

A chemical entity that results from the combination of atoms from two or more different elements in a specific proportion and structure.

Molecules

Groups of two or more atoms held together by chemical bonds, constituting the smallest identifiable unit of a compound.

Intermolecular Forces

Attractive forces between molecules that affect their physical properties such as boiling point, melting point, and solubility.

Dimethyl Ether

A colorless gas used as an aerosol propellant and a clean fuel, with the formula \(CH_3OCH_3\), also known as methoxymethane.