If the Social Value of Producing a Good Is Always

question 433

Multiple Choice

If the social value of producing a good is always higher than the private value of producing it, then there is a

• A)negative externality associated with the production of the good, and the market equilibrium quantity of the good is less than the socially optimal quantity.
• B)negative externality associated with the production of the good, and the socially optimal quantity of the good is less than the market equilibrium quantity.
• C)positive externality associated with the production of the good, and the market equilibrium quantity of the good is less than the socially optimal quantity.
• D)positive externality associated with the production of the good, and the socially optimal quantity of the good is less than the market equilibrium quantity.

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Definitions:

Equity Multiplier

A financial ratio that measures a company's leverage by comparing total assets to shareholders' equity, illustrating the extent to which a company is financed by debt.

Net Operating Income

The profit generated from a company's normal business operations after subtracting all operating expenses.

Net Income Before Taxes

The total earnings of a company before tax expenses have been deducted.

Times Interest Earned

A financial ratio that measures a company's ability to meet its debt obligations based on its current income.