Asked by TEDDY VELISSARIS on May 13, 2024
Verified
Suppose a business firm dumps its used car batteries into the Mississippi River.
A) The company's actions constitute an external cost.
B) The company's actions constitute an external benefit.
C) The company's actions would be an example of the market system efficiently allocating resources.
D) The company's actions damage no one but itself.
External Cost
A cost that is not borne by the parties directly involved in an economic transaction but by a third party or the environment.
Market System
A market system where investment, production, and distribution decisions are made according to supply and demand, and the prices for goods and services are established within a free pricing mechanism.
Mississippi River
The Mississippi River is a major North American river, flowing south from northern Minnesota to the Gulf of Mexico and serving as a key geographical and economic artery in the United States.
- Discern and expound upon economic notions such as inefficiencies in markets, goods of public interest, and peripheral costs/rewards.
- Understand the concept of externality and its impact on markets and public welfare.
Verified Answer
JR
Jaime ReynaMay 14, 2024
Final Answer :
A
Explanation :
Dumping used car batteries into the Mississippi River causes negative effects on the environment and downstream communities, constituting an external cost. The company is not bearing the full cost of its actions and is transferring that cost to others.
Learning Objectives
- Discern and expound upon economic notions such as inefficiencies in markets, goods of public interest, and peripheral costs/rewards.
- Understand the concept of externality and its impact on markets and public welfare.