Economics (AS & A Level) · May / June 2025 · Paper 31 · Question 4
9708Private costs and benefits, externalities and social costs and benefits
The diagram shows the marginal private costs (MPC) and marginal private benefits (MPB) of a product. Consumers initially estimate that marginal private costs are at MPC1 and marginal private benefits are at MPB1. What is the impact on the market demand for the product if the consumer realises they have underestimated the MPC of buying the product but not the MPB?
- AThe consumer underconsumes the product by Q1Q2.
- BThe consumer underconsumes the product by Q1Q3.
- CThe consumer overconsumes the product by Q1Q3.
- DThe consumer overconsumes the product by Q1Q4.
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Correct answer: C. The consumer overconsumes the product by Q1Q3.
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