Figure 5-2 Shows a Market with a Negative Externality

question 215

Multiple Choice

Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The size of marginal external costs can be determined by

• A)S2 + S1 at each output level.
• B)S2 - S1 at each output level.
• C)the supply curve S2.
• D)the supply curve S1.

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Definitions:

Usury Laws

Regulations that impose a maximum interest rate that may be charged on loans.

Low-Income Borrowers

Individuals or households with low income levels who may face difficulties in obtaining loans or are considered high risk by lenders.

Legal Interest Rate

The maximum rate of interest that lenders can legally charge borrowers, often set by law or regulation.

Economic Profits

Profits that exceed the opportunity costs of all resources used by a firm, including both explicit and implicit costs.