Figure 11-3 Figure 11-3 Shows a Market with an Externality

question 184

Multiple Choice

Figure 11-3 Figure 11-3 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 11-3.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,the diagram shows

• A) the effect of a positive externality in the production of a good.
• B) the effect of a negative externality in the production of a good.
• C) the effect of an external cost imposed on a producer.
• D) the effect of an external benefit such as a subsidy granted to consumers of a good.

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