Use the following graph to answer questions -Consider the graph that illustrates the production of electricity where not all of the costs of production are captured in the private costs.Which of the following statements is true? A)An output of Q_Private provides an optimal allocation of resources to the market. B)An output of Q_Privateprovides an efficient allocation of resources to the market. C)An output of Q_Social provides an optimal allocation of resources to the market. D)An output of Q_Private minus Q_Social provides an efficient allocation of resources to the market.

Question

Quizplus · Accepted Answer

When not all costs of production are captured in the private costs, it implies the presence of externalities. The social cost includes both private costs and external costs. An output level that considers the social cost (Q_Social) leads to an optimal allocation of resources because it accounts for the full cost of production, including externalities, ensuring that the true cost to society is considered in the production decision.

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