When consuming a good creates positive externalities,
a. private demand increases
b. private demand decreases
c. the private demand curve overstates the marginal social benefit of the good
d. the private demand curve understates the marginal social benefit of the good
e. the equilibrium quantity increases without government intervention
D
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Assume a consumption function of the following form: C = 500 + .9Y. If income rises by $100, consumption will increase by
A) $90. B) $550. C) $590. D) $600.
While the classicists believed that both velocity and output are stable, Keynesians believe:
a. velocity is stable and output is variable. b. velocity and output are both variable. c. output is stable and velocity is variable d. the same as the classical economists that both output and velocity are stable e. at low levels of income both velocity and output are stable, but at high levels of income velocity becomes variable.