Figure 10-4
-Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be

Question

Figure 10-4 -Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be A)Q₁. B)Q₂. C)Q₃. D)Q₄.

Quizplus · Accepted Answer

When external costs are internalized, the market equilibrium output aligns with the socially optimal output, which is typically less than the unregulated market output. In this context, Q2 represents the output level where the social cost curve intersects the demand curve, indicating the internalization of external costs.

Figure 10-4 -Refer to Figure 10-4. If All External Costs Were Internalized