When a Competitively Produced Product Has Negative Externalities in Production,the

question 33

Multiple Choice

When a competitively produced product has negative externalities in production,the industry will

• A)overproduce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium.
• B)overproduce the good because marginal private cost is less than marginal private benefit in competitive equilibrium.
• C)underproduce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium.
• D)underproduce the good because marginal private social cost is less than marginal private benefit in competitive equilibrium in competitive equilibrium.

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Definitions:

F.O.B.

F.O.B. (Free On Board) is a shipping term used in international trade to indicate that the seller is responsible for the goods until they are loaded on a vessel at the specified location, after which the buyer assumes risk.

Market Price

The current price at which an asset or service can be bought or sold in a given market.

Contract Cancellation

The legal termination of a contract's obligations by one or more of its parties.

Sales Contracts

Agreements between two parties where the seller agrees to deliver a product or service to a buyer for a specified price.