Figure 10-20.
-Refer to Figure 10-20. Without government intervention,
A)the equilibrium quantity is less than the socially optimal quantity.
B)the equilibrium quantity is larger than the socially optimal quantity.
C)the equilibrium quantity equals the socially optimal quantity.
D)there is no clear relationship between the equilibrium quantity and socially optimal quantity.

Question

​Figure 10-20. ​ 
-Refer to Figure 10-20. Without government intervention,
A)the equilibrium quantity is less than the socially optimal quantity. 
B)the equilibrium quantity is larger than the socially optimal quantity. 
C)the equilibrium quantity equals the socially optimal quantity. 
D)there is no clear relationship between the equilibrium quantity and socially optimal quantity.

Quizplus · Accepted Answer

Without government intervention, the equilibrium quantity is larger than the socially optimal quantity due to the presence of negative externalities, which are not accounted for in the market equilibrium.

​Figure 10-20. ​

Figure 10-20.