If the Government Overcorrected in a Situation of External Costs

question 249

Multiple Choice

If the government overcorrected in a situation of external costs

• A)​More than the efficient amount of the good would end up being produced.
• B)​Less than the efficient amount of the good would end up being produced.
• C)​It would result in a welfare cost in that market that was bigger than the initial welfare cost.
• D)Both a and c are would result.

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Definitions:

Total-Cost Curve

A graph that shows the total cost of producing different quantities of a good or service.

Marginal-Cost Curve

A graphical representation that shows how the cost of producing one additional unit of a good varies as the production volume changes.

Average-Fixed-Cost Curve

A graphical representation that shows the fixed costs of production per unit of output declining as the quantity of output increases.

Marginal-Cost Curve

A graphical representation that shows the cost of producing one more unit of a good.