For a Good Whose Production Creates an External Cost,the Efficient

question 28

Multiple Choice

For a good whose production creates an external cost,the efficient quantity of output is

• A) where the market demand curve and the market supply curve intersect.
• B) where the marginal social cost curve and marginal benefit curve intersect.
• C) as low as possible.
• D) zero.
• E) the amount of production so that the marginal social benefit exceeds the marginal social cost by as much as possible.

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Definitions:

Median

The middle value in a data set when the values are arranged in ascending or descending order.

Negative Correlation

A relationship between two variables where one variable increases as the other decreases.

Variable Increases

A situation in which the value of a variable becomes larger.

Relative Frequencies

The ratio of the number of times a particular value occurs to the total number of observations, used in statistical analysis.