Refer to the Diagram of the Market for Product X

question 94

Multiple Choice

Refer to the diagram of the market for product X. Curve St embodies all costs (including externalities) , and Dt embodies all benefits (including externalities) associated with the production
And consumption of X. Assuming the equilibrium output is Q2, we can conclude that the existence
Of external

• A) costs has resulted in an overallocation of resources to X.
• B) benefits has resulted in an overallocation of resources to X.
• C) costs has resulted in an underallocation of resources to X.
• D) benefits has resulted in an underallocation of resources to X.

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