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

question 127

Multiple Choice

Use the figure below to answer the following question(s) .
Figure 5-2

-Figure 5-2 illustrates the market for a product that generates an external cost.S₁ is the private market supply curve,while S₂ is the supply curve including the external cost.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 undersupplied relative to the conditions for economic efficiency.

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