Figure 13.1
Private Choices Regarding How Much of an Activity to Undertake
(a) (b) (c)

-According to figure 13.1 which of the figures depict a household that face perfectly competitive markets to that the Marginal private benefit is just the price.

Question

Figure 13.1
Private Choices Regarding How Much of an Activity to Undertake
(a) (b) (c)
 
-According to figure 13.1 which of the figures depict a household that face perfectly competitive markets to that the Marginal private benefit is just the price.

Quizplus · Accepted Answer

Figure a shows a household that faces a perfectly competitive market, where the marginal private benefit (MPB) is equal to the market price. This means that the household will choose the quantity of the activity where MPB = price, in order to maximize their net benefit. In contrast, Figures b and c depict households that face some form of market failure or externalities, where MPB ≠ price, and therefore their optimal choice will differ from the market outcome.

Figure 13.1 Private Choices Regarding How Much of an Activity to Undertake