Which of the following statements is TRUE about the relationship among external, internal and social costs?
A. Internal costs will always be higher than external costs.
B. Internal costs will never equal external costs.
C. Social costs will always be higher than external costs.
D. Social costs will always be lower than internal costs.
Answer: C
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To maintain a functioning gold standard:
A) nations are obliged to exchange any amount of issued paper money for gold. B) paper money is not allowed; all transactions must be in coins or gold. C) the monetary authority cannot exchange currency for gold. D) care must be taken to keep inflation under 10%.
Price cap regulation involves
A) setting the monopoly's price equal to its average total cost. B) setting the monopoly's price equal to its profit-maximizing price. C) setting a maximum price the monopoly may charge. D) assuming a natural monopoly will not charge a higher than profit-maximizing price. E) setting the monopoly's price equal to its marginal cost.