When the Consumption of a Good Generates an External Benefit

question 114

Multiple Choice

When the consumption of a good generates an external benefit,

• A) the private benefit consumers receive from the good will be higher than the true social benefit.
• B) too much of the good will tend to be produced from the viewpoint of economic efficiency.
• C) the community generally suffers an exactly offsetting external cost from the production of the good.
• D) the market demand curve will understate the total benefits derived from consumption of the good, and as a result, too little of it will be produced and consumed.

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Definitions:

Supply

The total amount of a specific good or service available for purchase at any given price level in a given market.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of the good supplied over a given period.

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a particular price within a given time frame.

Demand for Calendars

The consumers' desire and willingness to purchase calendars, which can fluctuate based on factors like the time of year and cultural or individual preferences.