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 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. This is a basic principle of microeconomics. Option C and D are incorrect because there is no overallocation or underallocation of resources shown in the graph, as there is no specific quantity or price shown on the graph.

Refer to the Graph Given Below