If There Are Positive Externalities Associated with the Consumption of a Good

question 76

Multiple Choice

If there are positive externalities associated with the consumption of a good or service:

• A) the private demand curve will overestimate the true demand curve.
• B) the private demand curve will underestimate the true demand curve.
• C) consumers will be willing to pay for all these benefits in private markets.
• D) the market demand curve will be the vertical summation of the individual demand costs.

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Definitions:

Oligopolist

A firm or individual that is part of a market structure in which a few companies control the majority of market sales.

Collude

When two or more firms work together to control a market, set prices, or limit production, often in ways that defy competitive principles or regulations.

Competitive Market

A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.

Strategic Interactions

The analysis of decision making in situations where two or more players (such as individuals or firms) must consider the potential reactions of others to their own actions.