Which of the Following Is a TRUE Statement

question 119

Multiple Choice

Which of the following is a TRUE statement?

• A) Externalities cannot be solved by market solutions and always require government action.
• B) Externalities would never be a problem if people were willing to comply with government regulations.
• C) Voluntary agreements can solve externality situations by making the party incurring the costs bear the costs of his or her actions.
• D) Externalities can only be handled by government regulation and emission taxes cannot work effectively.

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Definitions:

Marginal Cost

The expenditure involved in fabricating one more unit of a product or service.

Average Total Cost

Average total cost is the total cost of production divided by the quantity of output produced, indicating the cost on a per-unit basis.

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Marginal Cost

The cost associated with producing an additional unit of output, emphasizing the concept of incremental expense in production processes.