Whenever Net External Benefits Exist Then

question 5

Multiple Choice

Whenever net external benefits exist then:

• A) economic profits are zero.
• B) the social demand exceeds the market demand.
• C) the benefits associated with a product fall short of those accruing to the market.
• D) product differentiation increases the variety of products available to consumers.

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Definitions:

Marginal Revenue Product

The additional revenue generated from hiring one more unit of labor or other input.

Complementary Inputs

Goods or services that are used together in production and whose use is interconnected, such that an increase in demand for one increases the demand for the other.

Marginal Physical Product

The marginal physical product is the change in output resulting from employing one more unit of a particular input, holding other inputs constant.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with cheaper alternatives.