In the presence of positive externalities, a free market will choose a price which is too ____ and produce an output which is too ____ compared with the social optimum.

A recent study at a liberal arts college concluded that demand elasticity is 0.91 for college courses. The administration is considering a tuition increase to help balance the budget. An economist might advise the school to: a. decrease tuition in order to increase revenue by boosting enrollment

b. increase tuition in order to increase revenue. c. leave tuition unchanged as a change in tuition is unlikely to enhance the school's budget by increasing revenue. d. decrease tuition because demand for courses is elastic.

Refer to the diagram for athletic shoes. The optimal output of shoes is:

A. Q 1 .
B. Q 2 .
C. Q 3 .
D. greater than Q 3