When Production of a Good Provides External Benefits, There Will

question 167

Multiple Choice

When production of a good provides external benefits, there will be

• A) too few resources devoted to its production.
• B) too many resources devoted to its production.
• C) the optimal amount of resources devoted to its production.
• D) abnormally high profits earned by producers of the good.

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Definitions:

Market Supply

The total amount of a product that sellers are willing and able to sell across all relevant price levels within a given market.

Long Run

A period in which all factors of production and costs are variable, allowing firms to adjust fully to market changes.

Long-run Equilibrium

The condition in which, considering full adjustments in the market, the quantity supplied equals the quantity demanded at the prevailing market price.

Perfectly Competitive

A market structure characterized by many small firms, identical products, free entry and exit, and full information, leading to firms being price takers.