Figure 10-11
-Refer to Figure 10-11. The graph represents a market in which
A)there is no externality.
B)there is a positive externality.
C)there is a negative externality.
D)The answer cannot be determined from inspection of the graph.

Question

Figure 10-11 
-Refer to Figure 10-11. The graph represents a market in which
A)there is no externality. 
B)there is a positive externality. 
C)there is a negative externality. 
D)The answer cannot be determined from inspection of the graph.

Quizplus · Accepted Answer

The graph shows a shift in the demand curve from D1 to D2, which indicates that there is a positive externality present in the market. This is because the presence of the externality creates additional benefits to society that are not reflected in the private demand curve. As a result, the optimal market quantity Q* is greater than the quantity that would be produced in the absence of the externality, Q1.

Figure 10-11 -Refer to Figure 10-11. the Graph Represents a Market in a Market