A Shift from S1 to S2 Reflects the Change That

question 69

Multiple Choice

A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account.
-Refer to above figures. Prior to the shift of the curves, which panel and which curve involve the existence of negative externality?

• A) Panel 1 and S1
• B) Panel 1 and S2
• C) Panel 2 and D1
• D) Panel 2 and D2

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