Suppose That Flower Gardens Create a Positive Externality Equal to $1

question 190

Multiple Choice

Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown?

• A)They are equal.
• B)The equilibrium quantity is greater than the socially optimal quantity.
• C)The equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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Definitions:

Ambiguity

A situation or statement that is unclear or open to more than one interpretation.

Uncertainty

The state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possibility.

Corporate Social Responsibility

A business model that helps a company be socially accountable to itself, its stakeholders, and the public.

Socially Responsible

The obligation of individuals, groups, or organizations to act in a manner that benefits society at large, often beyond legal or regulatory requirements.