Consider a Market in Which There Is an External Benefit

question 193

Multiple Choice

Consider a market in which there is an external benefit. The inefficient market equilibrium is such that

• A) too little output is produced.
• B) too much output is produced.
• C) price is too high.
• D) marginal social cost is greater than marginal social benefit.

Determine the level of disposable income at which induced consumption, savings, and the APS are zero.

Understand the concept of disposable income and its impact on consumption and savings.

Calculate autonomous consumption based on given data.

Determine induced consumption from disposable income and consumption patterns.

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Definitions:

Federal Outlays

Government spending or expenditures, including the money spent on defense, education, social security, and other public services.

Federal Budget

A plan for federal government outlays and revenues for a specified period, usually a year.

Fiscal Policy

Government strategies to influence a country's economy through public spending and taxation decisions.

Monetary Policy

The process by which the central bank of a country controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.