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

question 125

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)Relative to economic efficiency,output of the good will be too large and the price too low.
• B)Relative to economic efficiency,output of the good will be too large and the price too high.
• C)Relative to economic efficiency,output of the good will be too small and the price too low.
• D)Relative to economic efficiency,output of the good will be too small and the price too high.

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