Asked by gillian williams on May 31, 2024
Verified
Private decisions about consumption of common resources and production of public goods usually lead to an
A) efficient allocation of resources and external effects.
B) efficient allocation of resources and no external effects.
C) inefficient allocation of resources and external effects.
D) inefficient allocation of resources and no external effects.
Common Resources
Resources that are not owned by anyone, cannot be easily limited, and are available for use by more than one person or group.
Public Goods
Goods that are non-excludable and non-rivalrous, meaning they can be consumed by one individual without preventing the consumption by others, and without leading to a decrease in available quantity.
Inefficient Allocation
When resources are not optimally distributed, leading to a situation where it is possible to improve at least one person's well-being without worsening any other's situation.
- Detail the interrelation between collective resources and unfavorable external consequences.
- Familiarize oneself with the process by which public goods facilitate positive external outcomes.
Verified Answer
AT
Alvetta ThompsonJun 05, 2024
Final Answer :
C
Explanation :
Private decisions often lead to an inefficient allocation of resources and external effects because individuals do not account for the broader impact of their actions on society, leading to overuse of common resources and underproduction of public goods.
Learning Objectives
- Detail the interrelation between collective resources and unfavorable external consequences.
- Familiarize oneself with the process by which public goods facilitate positive external outcomes.