The Reason Why We Sum the Demand Curves of Individual

question 42

Multiple Choice

The reason why we sum the demand curves of individual consumers vertically rather than horizontally in a public goods market is that:

• A)the willingness to pay in a public good market is smaller than that in a standard market.
• B)individual consumers are unlikely to be willing to pay enough to cover the marginal cost of production of a public good.
• C)the marginal social benefit of the Xth unit includes all consumers' marginal social benefits because the public good is non-exclusive and non-rival.
• D)the concept of quantities is meaningless in the case of public goods.

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Definitions:

R&D

Stands for Research and Development, which refers to investigative activities a business conducts to improve existing products and procedures or to lead to the development of new products and procedures.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the actual profitability of a company beyond just its accounting profits.

Inverted-U Theory

A hypothesis suggesting that a relationship between two variables follows an upside-down U shape, often applied to the correlation between productivity and stress levels.

R&D Expenditures

Financial investments made by firms, governments, or institutions in research and development activities aimed at innovation, creating new products, or improving existing ones.