Use the Following to Answer Question

question 5

Multiple Choice

Use the following to answer question:
Figure: Correcting for Market Failure
-(Figure: Correcting for Market Failure) Use Figure: Correcting for Market Failure.There is an external cost in the market illustrated in the figure,and the two upward-sloping lines reflect private and social marginal costs.If the government intervenes to correct for the external cost,the new _____ will now reflect _____ costs.

• A)supply curve S₁;both private and external
• B)supply curve S₂;private but not external
• C)supply curve S₂;both private and external
• D)demand curve (not shown);external but not private

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Definitions:

Income Summary

An account used in closing entries to collect the revenue and expenses for a specific accounting period before transferring the net result to capital.

Expenses

Costs incurred in the process of earning revenues, typically categorized as operating or non-operating.

Owner's Drawings

Withdrawals made by the owner of a sole proprietorship or partnership from the business for personal use.

Revenues

The total income generated from the sale of goods or services related to a company's primary operations.