Figure 5-1 Figure 5-1 Shows a Market with an Externality

question 177

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 S1 represent?

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

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Definitions:

Interdependence

A mutual reliance between two or more groups or individuals, where each party's welfare and benefits are reciprocally dependent upon the others'.

Mutuality

Partners’ acknowledgment that their lives are intertwined and thinking of themselves as a couple (“us”) instead of as two separate individuals (“me” and “you”).

Parasocial Relationship

A type of one-sided relationship where an individual becomes attached to a media persona or character without any reciprocal interaction.

Commitment

Partners’ investment of time, effort, and resources in their relationship, with the expectation that it will continue indefinitely.