Use the Figure Below to Answer the Following Question(s)

question 99

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)Point a illustrates the competitive private market outcome,while point b illustrates the outcome consistent with economic efficiency.
• B)Point b illustrates the competitive private market outcome,while point a illustrates the outcome consistent with economic efficiency.
• C)The competitive private market outcome is consistent with the conditions for economic efficiency.
• D)The good will tend to be oversupplied relative to the conditions for economic efficiency.

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Definitions:

Raw Materials Inventory

The stock of materials and components that a company holds for the future production of goods.

Present Analysis

The evaluation of current financial metrics and economic conditions to make decisions or forecasts about future performance.

Equipment Replacement

Equipment Replacement involves the process of substituting old, inefficient, or broken equipment with newer, more efficient models to maintain operational efficiency.

Incremental Cash Flows

The additional cash flow received by an organization from undertaking a new project, considered essential for analysis in capital budgeting.