If the Production of a Good Created Both External Costs

question 83

Multiple Choice

If the production of a good created both external costs and external benefits, but the external costs were greater, without government intervention, a market economy will:

• A)​not produce the product at all.
• B)​overproduce the product.
• C)​underproduce the product.
• D)​produce the optimal amount of the product.

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Definitions:

Gratuitous Promise

A one-sided agreement that the courts will not enforce.

Unilateral Contract

A contract in which one party makes a promise in exchange for the other party's performance, rather than a promise in return.

Counter-Offer

A proposal made as a response to an offer, which negates the original offer and suggests new terms for an agreement.

Revocation

The official cancellation or withdrawal of an offer, license, or agreement.