When an External Cost Exists That Is NOT Taken into Account

question 223

Multiple Choice

When an external cost exists that is NOT taken into account in the production of a product,

• A) the level of output is too low, and the supply curve should shift to the right to account for the externality.
• B) the level of output is optimal, and there should be no change in the supply curve.
• C) the price of the product is too high, and production should be expanded to lower the price.
• D) the level of output is too high, and the supply curve should shift to the left to account for the externality.

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Definitions:

Margin

The difference between the selling price of a product and the cost associated with producing it.

Margin

The difference between the selling price of a product or service and its cost, usually expressed as a percentage of the selling price.

Combined Return On Investment

A measure that evaluates the efficiency of an investment or compares the efficiency of several different investments.

Operating Data

Information related to the operations of a business, including production volumes, sales, and expenses, used for decision-making and performance evaluation.