If We Know That the Demand Curve for Good X

question 317

Multiple Choice

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that

• A)the market for good x is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone.
• B)the market for good x is characterized by a positive externality.
• C)the market for good x is characterized by a negative externality.
• D)the supply curve for good x fails to reflect the cost to society of producing that good.