Typically, total utility derived decreases as more of a good is consumed

If the market price of a good does NOT include all of the costs and benefits that arise from the production or consumption of the good, then

A) the market is perfectly competitive. B) an externality is present. C) society is consuming and producing the optimal amount of the good. D) resources are properly allocated.

Figure 5-1

In , S₁ and D illustrate the demand and supply for a product if it were produced in a normal competitive market. Which of the following would be true if the firms in the industry were instead able to get government licensing restrictions to limit competition in the market?
a.
The restricted market supply would be S₃, resulting in a lower price and a higher than efficient level of output.
b.
The restricted market supply would be S₃, resulting in a higher price and a less than efficient level of output.
c.
The restricted market supply would be S₂, resulting in a lower price and a higher than efficient level of output.
d.
The restricted market supply would be S₂, resulting in a higher price and a less than efficient level of output.