When the Production of a Good Has a Marginal External

question 73

Multiple Choice

When the production of a good has a marginal external cost,which of the following occurs in an unregulated market?
i.Overproduction relative to the efficient level will occur.
ii.The market price is less than the marginal social cost at the equilibrium quantity.
iii.A deadweight loss occurs.

• A) i only
• B) ii only
• C) iii only
• D) i and ii
• E) i, ii, and iii

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Definitions:

Capsaicin

A chemical compound found in chili peppers responsible for their hot and spicy flavor, which is also used in topical medications for its pain relief properties.

Substance P

A neuropeptide involved in the transmission of pain and other sensory signals in the central and peripheral nervous system.

Serotonin

A neurotransmitter that plays a crucial role in mood regulation, digestion, sleep, and various other bodily functions.

Dopamine

A neurotransmitter involved in reward, motivation, and various other neurological and physiological functions.