Use the figure below to answer the following questions.

Figure 16.2.1
-Refer to Figure 16.2.1.The figure shows the private marginal cost curve,the social marginal cost curve and the market demand curve.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 16.2.1
-Refer to Figure 16.2.1.The figure shows the private marginal cost curve,the social marginal cost curve and the market demand curve.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

The unregulated market will produce at the intersection of market demand and private marginal cost (PMC) curves, which results in a quantity greater than the efficient quantity where social marginal cost (SMC) intersects with demand. Therefore, the quantity produced is greater than the efficient quantity.

Use the Figure Below to Answer the Following Questions