Use the figure below to answer the following questions. Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If the market is unregulated,then
A)the quantity produced is efficient but price is too low.
B)the quantity produced is less than the efficient quantity.
C)the quantity produced is greater than the efficient quantity.
D)the quantity produced is efficient but the price is too high.
E)the externality is eliminated.

Question

Use the figure below to answer the following questions.  Figure 15.2.1
-Refer to Figure 15.2.1.The figure shows the marginal private cost curve,the marginal social cost curve and the market demand curve of a mining firm.If the market is unregulated,then
A)the quantity produced is efficient but price is too low. 
B)the quantity produced is less than the efficient quantity. 
C)the quantity produced is greater than the efficient quantity. 
D)the quantity produced is efficient but the price is too high. 
E)the externality is eliminated.

Quizplus · Accepted Answer

If the market is unregulated, the equilibrium quantity produced will be where the marginal private cost equals the market demand, which is Q1 in the figure. However, the efficient quantity is where the marginal social cost equals the market demand, which is Q2 in the figure. Therefore, the quantity produced is greater than the efficient quantity, resulting in overproduction and a deadweight loss.

Use the Figure Below to Answer the Following Questions