Post Utme Ui 2021 Commerce Question 31

Practice objective / multiple choice question 31 from the 2021 Post Utme Ui Commerce examination.

Post Utme Ui 2021 Commerce Objective / Multiple Choice
Question 31 POST_UTME_UI • 2021 • COMMERCE • objective

In a perfectly competitive market, the equilibrium price and quantity of a commodity are determined by the intersection of the market demand and supply curves. However, if the market is subject to externalities, the equilibrium price and quantity may not reflect the true social costs and benefits of production. Which of the following best describes the effect of an externality on the equilibrium price and quantity?

Answer Options

A. The externality causes the equilibrium price to increase and the quantity to decrease.
Correct Answer B. The externality causes the equilibrium price to decrease and the quantity to increase.
C. The externality has no effect on the equilibrium price and quantity.
D. The externality causes the equilibrium price to increase and the quantity to increase.
Correct Answer
B
Correct Option:
The externality causes the equilibrium price to decrease and the quantity to increase.

About This Question

This is Post Utme Ui 2021 Commerce Question 31. It is one of the objective questions from the 2021 Post Utme Ui Commerce examination.

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