Refer to the Competitive Market Diagram for Product Z

question 83

Multiple Choice

Refer to the 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 external benefits associated with the production of Z, then

• 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:

Marginal Product of Labor

The additional output that is produced by adding one more unit of labor, keeping other inputs constant.

Increased Productivity

A situation where more output is produced from the same amount of inputs due to efficiency improvements.

Managers Training

Programs designed to improve the skills, knowledge, and performance of individuals in leadership and supervisory roles.

Output Produced

The total amount of goods and services produced by a firm or an economy during a specific period.