3.1.5.4 and 4.1.8.4 Positive Externalities of Consumption

What does E show?

• MSB

• MPB

• MPB=MSB

What does F show?

• MPB=D

• MPB=MSB

• MSB

What does D show?

• MSC=MPC

• MPC

• MSC

• Something else

What does P show?

• Free market price

• Original price

• New price

• Social market price

Q to Q 1 shows...

• the under consumption of merit goods

• the over production of merit goods

• the over production of demerit goods

• the under consumption of demerit goods

The gap between curves E and F shows...

• External benefits

• External costs

Third-parties include any individual, organisation, property owner, or resource

• that is indirectly affected
• that is directly affected
• that is not indirectly affected
• that is not directly affected

The most direct way to increase the supply of merit goods is through ...

• Increasing subsidies
• Increasing taxes
• Decreasing subsidies
• Decreasing taxes

If the price of merit goods decrease, demand for goods which increase positive externalities...

• will rise
• will remain unchanged
• will fall