Figure 155 Figure 15

question 4

Multiple Choice

Figure 15.5 Figure 15.5 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 15.5.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does D₁ represent?

• A)The demand curve reflecting external benefits
• B)The demand curve reflecting social benefits
• C)The demand curve reflecting private benefits
• D)The demand curve reflecting the sum of private and social benefits