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.

---

Definitions:

Critical Thinkers

Individuals who actively and skillfully analyze, assess, and reconstruct their thinking, thereby enhancing the quality of their thoughts and decisions.

Reasonable Explanations

Logical or rational interpretations or accounts for phenomena, actions, or events based on evidence and reasoning.

Critical Thinkers

Individuals who actively and skillfully analyze, assess, and reconstruct their thinking, thereby making informed decisions.

Fewest Assumptions

A principle suggesting that the simplest explanation, requiring the least speculative assumptions, is often the most accurate.