If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:...

If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:

Select one:

a. the private marginal benefits of the activity are less than the marginal social benefits.

b. the production of this good has a positive externality.

c. the production of this good has a negative externality.

d. the private marginal costs for the activity are greater than the marginal social costs of the activity.

Solutions

Expert Solution

When the market equilibrium is greater than the socially optimal quantity, then the market is overproducing which is the case with goods associated with a negative externality or goods which have an adverse effect such as when a factory is polluting the air.

-the production of this good has a negative externality

option(C)

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

If the ROP is greater than the order quantity, explain how the ROP is implemented. Can...

If the ROP is greater than the order quantity, explain how the ROP is implemented. Can the ROP be more than twice the order quantity, and, if so, how is such a situation handled?

Explain Market equilibrium, equilibrium price, and equilibrium quantity

Compare a market operating at a quantity lower than equilibrium (ie. a price floor) with the...

Compare a market operating at a quantity lower than equilibrium (ie. a price floor) with the same market operating at the equilibrium quantity. Which of the following statements are true? a. A market operating below equilibrium will transfer some producer surplus to consumers. b. A market operating below equilibrium will transfer some consumer surplus to producers. c. A price floor will increase the producer and total surplus. d. It is unclear if the consumer surplus is greater or less at...

Using an appropriate diagram, carefully explain why a natural monopoly cannot sell the socially optimal quantity...

Using an appropriate diagram, carefully explain why a natural monopoly cannot sell the socially optimal quantity of output at a single price. Also, explain how second-degree price discrimination can allow for optimal output without the need to subsidize the firm. Be sure to identify total revenue.

1. If the market price is greater than _______ cost, a perfectly competitive firm can earn...

1. If the market price is greater than _______ cost, a perfectly competitive firm can earn economic profits in the short run. average variable marginal average fixed average total 2. The ___________ cost curve is closely associated with the firm's short-run supply curve in perfect competition. marginal average fixed average variable average total 3. Which of the following will not occur if demand falls in the competitive market? Less than normal profits are being earned during the adjustment to long-run...

Do patents provide socially optimal incentives? Should copyright be made shorter or longer than at present?...

Do patents provide socially optimal incentives? Should copyright be made shorter or longer than at present? What factors influence the optimal length of an intellectual property right?

In the market for Iphones the equilibrium price for Iphones is $400, and the quantity of...

In the market for Iphones the equilibrium price for Iphones is $400, and the quantity of Iphones sold is 20,000. (f) The Processor used to make Iphones becomes considerably cheaper and innovation raises the incomes of the population. Show the relevant shifts in your diagram (g) Suppose the government implements a price ceiling of $300. What happens to the market? (h) Suppose the government implements a price ceiling of $500. What happens to the market? (i) Suppose the government implements...

Consider the following hypothetical market. The equilibrium price is $10 and the equilibrium quantity is 20...

Consider the following hypothetical market. The equilibrium price is $10 and the equilibrium quantity is 20 units. The own-price elasticity of demand is -0.5 and the own-price elasticity of supply is 0.75. If price increases from $10 to $12, what will be the new level of quantity demanded? If necessary, round to the nearest two decimal points.

if the reorder point is greater than the order quantity, explain how the ROP is implemented....

if the reorder point is greater than the order quantity, explain how the ROP is implemented. Can the ROP be more than twice the order quantity? if so, how is such a situation handled?

In a competitive equilibrium, the equilibrium wage clears the market and everybody that is looking for a job can find one.

In a competitive equilibrium, the equilibrium wage clears the market and everybody that is looking for a job can find one. But in reality, we observe quite widespread involuntary unemployment. a) Describe how search frictions can generate unemployment in equilibrium. b) Define structural unemployment and discuss how structural unemployment differs from frictional unemployment. c) How can the generosity of the unemployment insurance benefit effect the length of the unemployment spell and the accepted wage offer? Use your own words and...

Subjects