Figure 4-19 Figure 4-19 Shows a Market with an Externality

question 22

Multiple Choice

Figure 4-19
Figure 4-19 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 4-19.Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality.The economically efficient output is Q₂.In that case,diagram shows

• A) the effect of a subsidy granted to producers of a good.
• B) the effect of an excess demand in a market.
• C) the effect of a positive externality in the consumption of a good.
• D) the effect of a negative externality in the consumption of a good.

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