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Author Question: Electricity has a negative production externality because _____. A. its marginal benefit ... (Read 79 times)

lidoalex

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on: Jun 29, 2018
Electricity has a negative production externality because _____.
 
  A. its marginal benefit decreases as more of it is consumed
  B. the marginal private cost of producing it increases as more of it is produced
  C. the marginal social cost of producing it exceeds the marginal private cost of producing it
  D. a marginal external cost lowers the marginal benefit from consuming it

Question 2

What is an indifference curve? Can two indifference curves intersect? Explain your answer.
 
  What will be an ideal response?


juicepod

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Reply #1 on: Jun 29, 2018
Answer to Question 1

C MSC = MC + marginal external cost, so with an external cost present, MSC > MC.

Answer to Question 2

All bundles of goods along an indifference curve are equally preferred. Each indifference curve shows a different level of satisfaction. If two indifference curves intersect, this means that at the point of intersection, the same bundle of goods leads to two different levels of satisfaction. Since this is not logically possible, indifference curves cannot intersect. The higher the indifference curve, the higher the level of satisfaction.
A


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lidoalex

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Reply #2 on: Jun 29, 2018
Thank you :)


juicepod

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Reply #3 on: Jun 29, 2018
Happy to help you


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