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If We Know That the Demand Curve for Good X

Question 339

Multiple Choice

If we know that the demand curve for good x fails to reflect the total value to society of that good, then we know that


A) the market for good x is characterized by an externality, but we cannot determine whether the externality is positive or negative from this fact alone.
B) the market for good x is characterized by a positive externality.
C) the market for good x is characterized by a negative externality.
D) the supply curve for good x fails to reflect the cost to society of producing that good.

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