Suppose a Good Has an External Benefit and No External

question 233

Multiple Choice

Suppose a good has an external benefit and no external cost. When a competitive, unregulated market is at its equilibrium, then the

• A) marginal private benefit is less than the marginal social benefit.
• B) marginal private benefit is greater than the marginal social benefit.
• C) marginal private cost is less than the marginal social cost.
• D) marginal private cost is greater than the marginal social cost.

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Definitions:

Long-Run Supply Curve

A graphical representation showing how the quantity of goods supplied by firms changes over time as all factors of production can be varied.

Decreasing-Cost Industry

An industry in which the costs of production decrease as the industry expands, often due to efficiencies gained from economies of scale.

Technologically Progressive Industry

An industry characterized by rapid and continuous technological innovation, leading to dynamic growth and evolution of its products and services.

Long-Run Supply Curve

A graphical representation showing the quantities of a good or service that a firm is willing and able to supply at different prices over a period where all inputs can be varied.