Figure 5-2 Figure 5-2 shows a market with a negative externality.
-A market demand curve reflects the
A) private benefits of consuming a product.
B) external benefits of consuming a product.
C) social benefits of consuming a product.
D) the sum of private and social benefits of consuming a product.

Question

Figure 5-2  Figure 5-2 shows a market with a negative externality.
-A market demand curve reflects the
A) private benefits of consuming a product. 
B) external benefits of consuming a product. 
C) social benefits of consuming a product. 
D) the sum of private and social benefits of consuming a product.

Quizplus · Accepted Answer

A market demand curve reflects the private benefits of consuming a product, meaning the benefits received by individuals who consume the product. This is different from external benefits, which are benefits that are gained by individuals who do not consume the product, such as the positive spillover effects of education or public art. In a market with a negative externality, the private benefits of consuming the product do not reflect the full cost to society, as there are negative spillover effects that are not accounted for by the consumer.

Figure 5-2 Figure 5-2 Shows a Market with a Negative