O a.) The market underproduces the good or service. O O b.) The market price is set too high. c.) The market overproduces the good or service. d.) The market price will be P*.

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter5: Difficult Cases For The Market And The Role Of Government
Section: Chapter Questions
Problem 10CQ
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O
a.) The market underproduces the good or service.
b.) The market price is set too high.
c.) The market overproduces the good or service.
O
d.) The market price will be P*.
Transcribed Image Text:O a.) The market underproduces the good or service. b.) The market price is set too high. c.) The market overproduces the good or service. O d.) The market price will be P*.
Consider the positive externality graph
If firms are able to ignore the benefit to society, which of the following statements is correct?
Price ($)
P*
P₁
Private
0
Qp
Private
MSC
MSB
Dprivate
Quantity (in units)
Transcribed Image Text:Consider the positive externality graph If firms are able to ignore the benefit to society, which of the following statements is correct? Price ($) P* P₁ Private 0 Qp Private MSC MSB Dprivate Quantity (in units)
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