If production of an item results in negative external costs, then
A) the market price is below the socially preferred price that reflects the external costs.
B) the market price is above the socially preferred price that reflects the external costs.
C) market forces will always correct the problem.
D) the market quantity is too low from society's point of view.
Answer: A
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Indicate whether the statement is true or false
If a competitive firm has a U-shaped marginal cost curve then
A) the profit maximizing output will always generate positive economic profit. B) the profit maximizing output will always generate positive producer surplus. C) the profit maximizing output is found where MC = MR and MC is decreasing. D) the profit maximizing output is found where MC = MR and MC is constant. E) the profit maximizing output is found where MC = MR and MC is increasing.