Which of the following statements is TRUE?Elimination ToolSelect one answerAMarket demand is a horizontal summation of individual demand curves for public goods.BMarket demand is a horizontal and vertical summation of individual demand curves for private goods.CMarket demand is a horizontal summation of individual demand curves for private goods.DMarket demand for both public and private goods is calculated by doing a vertical summation of individual demand curves.EMarket demand for both public and private goods is calculated by doing a horizontal summation of individual demand curves.
Question
Which of the following statements is TRUE?Elimination ToolSelect one answerAMarket demand is a horizontal summation of individual demand curves for public goods.BMarket demand is a horizontal and vertical summation of individual demand curves for private goods.CMarket demand is a horizontal summation of individual demand curves for private goods.DMarket demand for both public and private goods is calculated by doing a vertical summation of individual demand curves.EMarket demand for both public and private goods is calculated by doing a horizontal summation of individual demand curves.
Solution
The correct answer is C. Market demand is a horizontal summation of individual demand curves for private goods.
Here's why:
A. This statement is false because the market demand for public goods is not a horizontal summation of individual demand curves. Public goods are non-rivalrous and non-excludable, meaning one person's consumption does not affect another's and no one can be excluded from using the good. Therefore, the demand for public goods is typically represented by a vertical summation of individual demand curves, not horizontal.
B. This statement is false because the market demand is not a horizontal and vertical summation of individual demand curves for private goods. It's only a horizontal summation.
C. This statement is true. In the case of private goods, which are rivalrous and excludable, the market demand curve is derived by horizontally summing the individual demand curves. This means that at each price, the quantities demanded by each consumer (at that price) are added together.
D. This statement is false. The market demand for public goods is calculated by doing a vertical summation of individual demand curves, not both public and private goods.
E. This statement is false. The market demand for private goods is calculated by doing a horizontal summation of individual demand curves, not both public and private goods.
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