In a Competitive Market with a Negative Externality, Firms Produce

question 36

Multiple Choice

In a competitive market with a negative externality, firms produce an

• A)amount and quality of output most desired by the market.
• B)amount sometimes less and sometimes more than the efficient quantity.
• C)efficient amount of output.
• D)amount less than the efficient quantity.
• E)amount more than the efficient quantity.

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Definitions:

Internal Rate

Often related to the internal rate of return (IRR), it's a metric used in financial analysis to estimate the profitability of potential investments.

Time Value

The theory that money today is more valuable than the same quantity in the future, due to its potential to accumulate additional value.

Profitability Index

A financial tool that calculates the ratio between the present value of cash inflows and the present value of initial investment, often used in capital budgeting.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to analyze the profitability of an investment.