Describe the rationale behind supply and demand analysis for public goods
Please provide the best answer for the statement.
With a private good you add together the quantities demanded people are willing to pay at each possible price, whereas with a public good you add together the prices people are willing to pay for the last unit of the public good at each possible quantity demanded. The demand curve for a public good slopes downward because of the law of diminishing marginal utility. The supply curve for a public good is up sloping because of the law of diminishing returns. The demand curve for a public good is, in essence, a marginal benefit curve; the supply curve for a public good reflects rising marginal costs. The optimal quantity of a public good will be shown by the intersection of the collective demand and supply curves, which means that the marginal benefit of the last unit equals that unit’s marginal cost.
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When two mutually exclusive projects are considered, the NPV calculations and the IRR calculations may, under certain circumstances, give conflicting recommendations as to which project to accept
The reason for this result is that in the NPV calculation, cash inflows are assumed to be reinvested at the cost of capital, while in the IRR solution, reinvestment takes place at A) the hurdle rate. B) the accounting rate of return. C) the prime rate. D) the project's internal rate of return.
A positive externality occurs when
a. Jack receives a benefit from John's consumption of a certain good. b. Jack receives personal benefits from his own consumption of a certain good. c. Jack's benefit exceeds John's benefit when they each consume the same good. d. Jack's receives a loss from John's consumption of a certain good.