-Refer to the above figure. An external benefit exists. The amount of that benefit is represented by
A)P₄.
B)the vertical distance between D₁ and D₂.
C)the distance between G and F.
D)P₃.

Question

-Refer to the above figure. An external benefit exists. The amount of that benefit is represented by
A)P₄. 
B)the vertical distance between D₁ and D₂. 
C)the distance between G and F. 
D)P₃.

Quizplus · Accepted Answer

The vertical distance between D₁ and D₂ represents the external benefit, as it shows the difference in consumer surplus between the market equilibrium without the externality (D₁) and the market equilibrium with the externality (D₂).

-Refer to the Above Figure