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

question 214

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.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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