Suppose that one firm produces a product that results in negative external costs to society. This information suggests that
A) resources are under-allocated to the firm.
B) the equilibrium market price of the product includes the external costs borne by society.
C) resources are over-allocated to the firm.
D) at the market price, quantity demanded is less than quantity supplied.
Answer: C
You might also like to view...
The international financial organization created at the Bretton Woods conference in 1944 that helps developing countries obtain low-interest loans is called the:
A) World Bank. B) International Monetary Fund. C) U.S. Treasury. D) U.S. Agency for International Development.
Political institutions are more likely to allow and encourage the emergence of good economic institutions and policies when
a. the top government executives have enough power to impose good economic arrangements on the nation. b. constitutional constraints prevent laws and regulations that weaken the rights of property owners, curtail voluntary exchange, and provide for decentralization of government. c. the elected executive and legislative branches have fewer constraints on what they can do, leaving them free to innovate and improve economic institutions. d. well organized interest groups exert a powerful influence on the political process.