Refer to the Below Competitive Market Diagram for Product Z

question 24

Multiple Choice

Refer to the below competitive market diagram for product Z.Assume that the current market demand and supply curves for Z are D₂ and S₂.If there are substantial positive externalities associated with the production of Z, it can be argued that:

• A)efficient resource allocation occurs at output G and price B because the market mechanism does not measure all benefits.
• B)an output smaller than G would improve resource allocation.
• C)government should levy a per unit excise tax on Z to shift the demand curve toward D₁.
• D)an output greater than G would result in a more efficient allocation of resources.

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Definitions:

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on investment.

Inflation

The rate at which the general level of prices for goods and services is rising and, subsequently, purchasing power is falling.

Medical Technology

The application of scientific and technological advances to the development of solutions and equipment that improve health conditions, diagnosis, and treatment of diseases.

Escalating Costs

Refers to the phenomenon where the prices of goods, services, or requirements for running a business or project continuously rise over time.