Asked by Oguche Agnebb on Jul 12, 2024
Verified
If a profit-maximizing competitive firm ________ compensate society for a negative externality, the firm will choose to produce where price equals marginal cost.
A) does not have to
B) is pressured to
C) voluntarily chooses to
D) is legally bound to
Negative Externality
Occurs when the production or consumption of a good or service imposes costs on third parties who are not involved in the transaction.
Marginal Cost
The financial impact of producing one more unit of a product or service.
- Explore the impact of government interventions, such as taxation and subsidy provision, on rectifying externalities.
Verified Answer
CR
Christian RuttleyJul 18, 2024
Final Answer :
A
Explanation :
When a profit-maximizing competitive firm does not have to compensate society for a negative externality, it will continue to produce where price equals marginal cost, ignoring the external costs its production imposes on society.
Learning Objectives
- Explore the impact of government interventions, such as taxation and subsidy provision, on rectifying externalities.
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