The Diagram Below Shows Demand and Supply Curves for Some

question 118

Multiple Choice

The diagram below shows demand and supply curves for some perfectly competitive market. FIGURE 16-2
-Refer to Figure 16-2.Suppose that the marginal benefit curve (MB) includes all social benefits and that there is a positive externality in production.In this case,________ for allocative efficiency.

• A)P₁ and Q₁ are appropriate
• B)the price P₁ is appropriate but the quantity Q₁ is too low
• C)the price P₁ is appropriate but the quantity Q₁ is too high
• D)the price P₁ is too low and the quantity Q₁ is too high
• E)the price P₁ is too high and the quantity Q₁ is too low