Refer to the graph given below. The graph above shows the supply of and the demand for a public good.Which of the following statements is correct? A)The supply curve reflects the marginal cost of producing each unit of the good, and the demand curve reflects the marginal benefit of consuming each unit of the good. B)The demand curve reflects the marginal cost of producing each unit of the good, and the supply curve reflects the marginal benefit of consuming each unit of the good. C)There will be an overallocation of resources at output level Q₁. D)There will be an underallocation of resources at output level Q₃.

Question

Quizplus · Accepted Answer

The supply curve shows the quantity of the good that sellers are willing to provide at each price level, reflecting the marginal cost of producing each unit. The demand curve shows the quantity of the good that buyers are willing to purchase at each price level, reflecting the marginal benefit of consuming each unit. Therefore, statement A is correct.

There is no mention of overallocation or underallocation in the graph or question stem, so choices C and D are incorrect.

Refer to the Graph Given Below