Using Figure 4.2, suppose point C represents the optimal mix of public and private goods for a society. The market mechanism is likely to result in a mix of output represented by point
A. B because the market mechanism tends to overproduce public goods.
B. F because the market mechanism is inefficient.
C. D because the market mechanism tends to underproduce public goods.
D. C because the market mechanism is efficient.
Answer: C
You might also like to view...
For a perfectly competitive firm, at profit maximization
A) production must occur where average cost is minimized. B) market price exceeds marginal cost. C) total revenue is maximized. D) marginal revenue equals marginal cost.
If the marginal utility of each good consumers buy does not diminish but remains constant, we should witness consumers:
a. buying no goods at all. b. spending all of their income on the good with the highest MU. c. buying one of each good. d. buying only the least expensive goods. e. become indifferent to what goods they buy.