Negative Externality

The following questions refer to the accompanying diagram, which shows the effects of a negative externality created by an industry's production. The equilibrium quantity in the absence of any attempt to internalize the externality is QE, and the optimal quantity according to a Pigovian analysis is QO.

-Refer to Negative Externality.Suppose there is no attempt to internalize the externality.Pigovian analysis indicates that the externality creates a deadweight loss equal to
A) area C + D + E + G + H.
B) area D + E + H.
C) area C + D + G + H.
D) area E.

Question

Negative Externality

The following questions refer to the accompanying diagram, which shows the effects of a negative externality created by an industry's production. The equilibrium quantity in the absence of any attempt to internalize the externality is QE, and the optimal quantity according to a Pigovian analysis is QO.

-Refer to Negative Externality.Suppose there is no attempt to internalize the externality.Pigovian analysis indicates that the externality creates a deadweight loss equal to
A) area C + D + E + G + H. 
B) area D + E + H. 
C) area C + D + G + H. 
D) area E.

Quizplus · Accepted Answer

The Answer of Negative Externality

The following questions refer to the accompanying diagram, which shows the effects of a negative externality created by an industry's production. The equilibrium quantity in the absence of any attempt to internalize the externality is QE, and the optimal quantity according to a Pigovian analysis is QO.

-Refer to Negative Externality.Suppose there is no attempt to internalize the externality.Pigovian analysis indicates that the externality creates a deadweight loss equal to
A) area C + D + E + G + H. 
B) area D + E + H. 
C) area C + D + G + H. 
D) area E.

Negative Externality The Following Questions Refer to the Accompanying Diagram, Which Shows