Refer to the Above Supply and Demand Graph for a Public

question 113

Multiple Choice

Refer to the above supply and demand graph for a public good.Which one of the following statements is correct?

• A) The supply curve reflects the marginal cost and the demand curve reflects the marginal benefit of this public good.
• B) The demand curve reflects the marginal cost and the supply curve reflects the marginal benefit of this public good.
• C) There will be an overallocation of resources at output level Q₁.
• D) There will be an underallocation of resources at output level Q₃.

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Definitions:

Accounts Receivable

Money owed to a business by its clients or customers for goods or services delivered or used but not yet paid for.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance based on the accounting equation; assets and expenses normally have a debit balance, while liabilities, equity, and revenue normally have a credit balance.

Withdrawals

Money taken out from a bank account, or the act of taking out funds or assets from a business by the owner for personal use.

Assets

Resources owned or controlled by a business, expected to bring future economic benefits.