Consider a Product (Say,tulip Bulbs)that Generates Positive Externalities When It

question 46

Multiple Choice

Consider a product (say,tulip bulbs) that generates positive externalities when it is consumed (other people enjoy looking at them) .In this case,

• A)the government could tax the production of this good to improve efficiency.
• B)at market equilibrium,the marginal social benefit is less than the marginal cost of producing the last unit.
• C)at the market equilibrium,the output would be greater than the socially optimal amount.
• D)too few tulips will be produced and consumed unless external benefits are internalized.
• E)at the market equilibrium,the price is too high to be allocatively efficient.

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Definitions:

Fewer Downloads

A situation indicating a decrease in the number of times digital content is downloaded by users, possibly reflecting changes in preference or accessibility.

Inferior Good

A type of good for which demand decreases as the income of the consumers increases, opposed to a normal good where demand increases with rising income.

Frozen Pizzas

Pre-made pizzas that are sold frozen to consumers, who then bake or heat them at home. They are a convenient, quick meal option that varies in quality and ingredients.

Substitutes

Goods or services that can be used in place of each other, where the increase in the price of one leads to an increase in the demand for another.