Figure 5-1 Figure 5-1 Shows a Market with an Externality. the Current

question 108

Multiple Choice

Figure 5-1

Figure 5-1 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 5-1.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₂ represent?

• A)the market supply curve reflecting marginal private cost
• B)the market supply curve reflecting marginal social cost
• C)the market supply curve reflecting external cost
• D)the market supply curve reflecting implicit cost

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Definitions:

Outstanding Shares

Represents the total number of shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s insiders.

Limited Liability Company

A business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability protection of a corporation.

Partnership

An association of two or more persons to carry on a business for profit.

Corporation

A legal entity recognized by law, distinct from its owners, with rights to own property, sue, and be sued.