The Diagram Below Shows Demand and Supply Curves for Some

question 99

Multiple Choice

The diagram below shows demand and supply curves for some perfectly competitive market.
FIGURE 16-2
-Refer to Figure 16-2.Suppose that the marginal benefit curve (MB) includes all social benefits and that there is a negative externality in production.In this case, ________ for allocative efficiency.

• A)P1 and Q1 are appropriate
• B)the price P1 is appropriate but the quantity Q1 is too low
• C)the price P1 is appropriate but the quantity Q1 is too high
• D)the price P1 is too low and the quantity Q1 is too high
• E)the price P1 is too high and the quantity Q1 is too low

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