If We Know That the Supply Curve for Good X

question 407

Multiple Choice

If we know that the supply curve for good x fails to reflect the total cost to society of producing 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 demand curve for good x fails to reflect the value to society of that good.

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Definitions:

Extraction Capacity

Extraction capacity refers to the maximum amount of resources, such as minerals, oil, or gas, that can be extracted from the ground or other sources effectively and efficiently.

Market Supply Curve

A graphical representation of the quantity of goods and services that suppliers are willing and able to supply at different price levels over a given time period.

Perfectly Elastic

A situation in economics where the quantity demanded or supplied changes infinitely in response to any change in price.

Drug-Interdiction Policies

Drug-interdiction policies consist of measures and efforts made by governments or organizations to halt the illegal production, distribution, and consumption of drugs.