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What happens to the consumption of a demerit good in a free market, and why?
A
It is over-consumed in a free market because producers underestimate its private and external benefits.
B
It is consumed at the social optimum in a free market because prices include all social costs.
C
It is over-consumed in a free market because consumers underestimate its private and external costs.
D
It is under-consumed in a free market because consumers overestimate its private and external costs.
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3.1.2 addressing the over-consumption of demerit goods and the under-consumption of merit goods Flashcards
26 flashcards on CIE Intl A Level Economics 3.1.2 addressing the over-consumption of demerit goods and the under-consumption of merit goods: the key terms and definitions you need to recall.