In the intertemporal economic model of resource allocation, when an non-internalized externality causes the Marginal Private Cost of current consumption to be less than the corresponding Marginal Social Cost of current consumption, then rational households are predicted to
A) consume the economically efficient quantity of current output.
B) consume less than the economically efficient quantity of current output.
C) consume more than the economically efficient quantity of current output.
D) randomly respond to the altered private incentive; unrpredictably using more or less than the economically efficient amount of current output.
E) none of the above.
Correct Answer:
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