Use the Figure Below to Answer the Following Question(s)

question 148

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 5-3
-Figure 5-3 illustrates the market for a product that generates an external benefit. D₁ is the private market demand curve, while D₂ is the demand curve including the external benefit. Which of the following is true?

• A) Point a illustrates the competitive private market outcome, while point b illustrates the outcome consistent with economic efficiency.
• B) Point b illustrates the competitive private market outcome, while point a illustrates the outcome consistent with economic efficiency.
• C) The competitive private market outcome is consistent with the conditions for economic efficiency.
• D) The good will tend to be oversupplied relative to the conditions for economic efficiency.

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