An Important Difference Between the Demand for a Private Good

question 144

Multiple Choice

An important difference between the demand for a private good and the demand for a public good is that

• A)individuals reveal their preferences for a public good but they do not have to reveal their preferences a private good.
• B)the resources used to provide public goods are common resources or government owned; the resources used to produce private goods are all privately owned.
• C)individuals reveal their preferences for a private good but they do not have to reveal their preferences for a public good.
• D)the demand for a private good produces consumption externalities; the demand for a public good produces production externalities.

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Definitions:

Relevant Costs

Costs that will be affected by a decision in a particular situation, excluding sunk costs and costs that do not differ between alternatives.

Unprofitable Product Lines

Product categories or items that do not generate a profit and may result in a financial loss for the company.

Variable Overhead

Costs that vary with production volume, such as indirect materials and supplies, which are not directly traceable to a single product unit.

Fixed Overhead

Expenses that remain constant regardless of production or sales volume, including rent, salaries, and insurance premiums.