A Result of a Positive Externality in the Production of a Good

question 158

Multiple Choice

A result of a positive externality in the production of a good is that

• A) the price system will over-allocate resources to the production of that good or service.
• B) the price system will under-allocate resources to the production of that good or service.
• C) the market supply will be too high.
• D) the market demand will be too high.

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Definitions:

Variable Costs

Costs that change in proportion to the level of activity or volume of production in a company.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance.

Variable Costs

Costs that change in proportion to the level of activity or volume of production.

Break-even Point

The point of business operation at which revenues equal expenses, resulting in no net loss or gain.