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

question 165

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 S₂ represent?

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

---

Definitions:

Digital Natives

Individuals who have been exposed to digital technologies from an early age, making them highly familiar and comfortable with digital communication and media.

Technological Advances

Macroenvironmental factor that has greatly contributed to the improvement of the value of both products and services in the past few decades.

Impact

The significant effect or influence that something, such as a new technology or policy, has on a situation or person.

Income Distribution

The way in which a nation’s total earnings are spread amongst its population.