Asked by
susana soto-munoz
on Dec 11, 2024
Verified
Figure 5-3 illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true?
A) Relative to economic efficiency, output of the good will be too large and the price too low.
B) Relative to economic efficiency, output of the good will be too large and the price too high.
C) Relative to economic efficiency, output of the good will be too small and the price too low.
D) Relative to economic efficiency, output of the good will be too small and the price too high.
External Benefit
A benefit that results from an economic transaction but is received by individuals or groups who are not direct parties to the transaction.
Economic Efficiency
A situation where the allocation of resources produces the maximum possible satisfaction of our wants without wasting any resources.
- Analyze how market efficiency is influenced by external costs and benefits.
Verified Answer
AP
Learning Objectives
- Analyze how market efficiency is influenced by external costs and benefits.