In a free-market economy, a product which entails a positive externality will be Multiple Choice underproduced. provided solely by the government produced at the optimal level
Added by Kimberly P.
Close
Your feedback will help us improve your experience
Sanchit Jain and 69 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
If the free market is called upon to provide public goods, then: a) there will be more goods provided than is optimal b) there will be fewer goods provided than is optimal c) the market will provide the optimal number of goods d) the market price will be correct, but the optimal amount of output will not be produced e) the firms will earn excess profit.
Sanchit J.
1. A. If the production of a good yields a negative externality, then the social-cost curve lies (above, below) the supply curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each.) B. If the production of a good yields a positive externality, then the social-value curve lies to the (left, right) of the demand curve, and the socially optimal quantity is (greater, less) than the equilibrium quantity. (Circle the correct answer for each) C. With government intervention, a market will tend to (over, under) supply products that produce positive externalities. Whereas with negative externalities, a market will tend to (over, under) supply products when there is no government intervention. (Circle the correct answer for each.)
Jennifer S.
'Which of the following statements about a market that is affected by a positive externality is correct? The optimum level of output is less than the free market level of output and the optimum price is greater than the free market price: The optimum level of output is greater than the free market level of output and the optimum price is less than the free market price: The optimum level of output is less than the free market level of output and the optimum price is less than the free market price. The optimum level of output is greater than the free market level of output and the optimum price is greater than the free market price:'
Andrew D.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD