Explain why an external benefit leads to an under-allocation of resources to the production of a good

What will be an ideal response?


An external benefit is the benefit associated with the consumption of a good that is not borne by the buyer. Rather, the benefit is borne by third parties. The buyer calculates the amount of the good to consume by comparing private benefits and costs. By ignoring the external benefit, the buyer consumes less of the good than would be the case if the buyer actually received the full benefits of consumption. Hence, society under allocates resources to the production of the good.

Economics

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Economics

"If the price of crude oil falls, the demand for gasoline will increase, so people will by more gas and the price of gas will go up." Is this statement true or false? Explain

What will be an ideal response?

Economics

Which of the following is true?

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Economics

Price elasticity of demand is defined as

a. the percentage change in price divided by the percentage change in quantity demanded b. the percentage change in quantity demanded divided by the percentage change in price c. the change in quantity demanded divided by the change in price d. the change in price divided by the change in quantity demanded e. the quantity demanded divided by the price

Economics