If there are no externalities, a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because
A) a deadweight loss will occur that is equal to the area under the demand curve for the good.
B) too much of the good will be produced.
C) too little of the good will be produced.
D) economic surplus is maximized.
Question 2
Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is considering setting up his business as a sole proprietorship. What is one disadvantage to Jeremy of setting up his business as a sole proprietorship?
A) As a sole proprietor, Jeremy would face unlimited liability.
B) As a sole proprietor, Jeremy would be subject to significant rules and regulations.
C) As a sole proprietor, Jeremy would be taxed twice.
D) As a sole proprietor, Jeremy would not have control of the business.
