The Graphs Below Refer to Two Separate Product Markets

question 128

Multiple Choice

The graphs below refer to two separate product markets.Assume that society's optimal level of output in each market is Q₀ and that government purposely shifts the market supply curve from S to S₁in diagram (a) and from S to S₂ in diagram (b) .We can conclude that the government is correcting for:

• A)negative externalities in diagram (a) and positive externalities in diagram (b).
• B)positive externalities in diagram (a) and negative externalities in diagram (a).
• C)negative externalities in both diagrams.
• D)positive externalities in both diagrams.

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