Figure 10-6
-Refer to Figure 10-6. Which quantity represents the socially-optimal quantity of output in this market?
A)Q
B)Q'
C)Either Q or Q'. It is necessary to know whether the externality is positive or negative to determine the socially-optimal quantity.
D)Some quantity between Q and Q'. The socially-optimal quantity depends on the negotiating skills of the interested parties.

Question

Figure 10-6 
-Refer to Figure 10-6. Which quantity represents the socially-optimal quantity of output in this market?
A)Q 
B)Q' 
C)Either Q or Q'. It is necessary to know whether the externality is positive or negative to determine the socially-optimal quantity. 
D)Some quantity between Q and Q'. The socially-optimal quantity depends on the negotiating skills of the interested parties.

Quizplus · Accepted Answer

The socially-optimal quantity of output is typically where the marginal social benefit equals the marginal social cost. In many diagrams, this is represented by Q', which accounts for externalities.

Figure 10-6 -Refer to Figure 10-6. Which Quantity Represents the Socially-Optimal Quantity