When the Consumption of a Good Creates an External Benefit

question 338

Multiple Choice

When the consumption of a good creates an external benefit,

• A) the marginal social cost curve lies below the marginal private cost curve.
• B) the marginal social benefit curve lies above the marginal private benefit curve.
• C) the quantity produced in an unregulated, competitive market is greater than the efficient quantity.
• D) None of the above answers is correct.

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Definitions:

Risk-averse

describes an individual or entity that prefers to avoid risk and opts for the option with the least uncertainty.

Risk Premium

The additional return expected by an investor for taking on a higher level of risk compared with a risk-free investment.

Utils

A hypothetical unit of measurement used in economics to quantify the amount of utility or satisfaction gained by consuming goods and services.

Outcomes

The results or effects of actions, decisions, or policies, with a broader application beyond purely economic contexts.