Author Question: Refer to Figure 17-9. A supply shock, such as rising oil prices, would be depicted as a movement ... (Read 113 times)

cdr_15 · **on:** Jun 29, 2018

Refer to Figure 17-9. A supply shock, such as rising oil prices, would be depicted as a movement from

A) C to B to A. B) C to D to A. C) A to B to C. D) A to D to C. E) C to E to B.

Question 2

The purchase of fire extinguishers by apartment dwellers provides benefits to their neighbors. Explain why this situation leads to an inefficient outcome.

What will be an ideal response?

ky860224 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

When the person renting an apartment buys a fire extinguisher, the decision is based on the utility the person expects to receive from owning it. However, if his neighbor also receives utility from his purchase of the fire extinguisher, its true social value will not be reflected in the price. Thus, too few fire extinguishers will be purchased.