Use the Figure Below to Answer the Following Question(s)

question 61

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 5-3
-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.

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Definitions:

Pricing Methods

Strategies and approaches used by companies to set the sales price of their products or services.

Seasonal Discounts

Price reductions offered during certain times of the year to stimulate sales during off-peak seasons.

Channel Members

Entities involved in the process of moving products or services from the manufacturer to the end consumer, such as wholesalers, retailers, or distributors.

Carmex

A brand of topical lip balm produced to moisturize, heal, and protect dry or chapped lips.