Use the following supply and demand graph for product X to answer the question below. What would happen if the government subsidized consumption of this product because it has positive externalities in consumption?

The Law of Diminishing Marginal Returns states that:

A) successive increases in inputs eventually lead to less additional output. B) successive increases in product prices lead to a fall in revenue. C) the demand for a good decreases as the price of the good increases. D) the net benefits of a perfectly competitive firm decrease as more firms enter the market.

The fact that an economy always returns to the natural rate level of output is known as

A) the excess demand hypothesis. B) the price-adjustment mechanism. C) the self-correcting mechanism. D) the natural rate of unemployment.