Which of the following products would be least capable of producing an externality ?
Correct answer: C. food
- A. inoculations against disease
- B. cigarettes
- C. food
- D. education
- E. stereo equipment
Explanation
Food generally provides mainly private benefits, while inoculations, education, cigarettes, and stereo equipment can create significant spillover benefits or costs. Thus ordinary food is the least likely among these choices to generate an externality.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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