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:

Circular-flow Diagram

A visual model in economics that shows how money, goods, and services flow through the economy between households and firms.

Factors Of Production

The assets utilized in creating goods and services, encompassing land, work, money, and business initiative.

Income Paid

The total earnings received by individuals or entities for their labor, investment, or property use.

Markets For Goods And Services

Venues where buyers and sellers exchange goods and services, including physical marketplaces and online platforms.