To Maximize Social Welfare in the Presence of a Negative

question 20

Multiple Choice

To maximize social welfare in the presence of a negative externality, marginal __________ must equal marginal __________.

• A)social cost; private cost
• B)private cost; social cost
• C)social cost; social benefit
• D)private cost; social benefit
• E)social cost; external cost

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Definitions:

Floating Exchange Rates

A system in which the value of a currency is determined by the forex market based on supply and demand relative to other currencies, unlike fixed exchange rates that are tied to a physical commodity or another currency.

Gold Convertible

A financial system where a country's currency has a fixed value in terms of gold, allowing it to be exchanged for a specified amount of gold.

Balance-of-Payment Deficits

A situation in the balance of payments where the payments made by a country for its imports, investments abroad, and other outflows are greater than the inflows from exports, foreign investments, etc.

Japanese Yen

The official currency of Japan, known globally as a major currency for trade and finance.