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-Refer to Figure 15-1

Question 2

Multiple Choice

-Refer to Figure 15-1. If, because of an externality, the economically efficient output is Q<sub>2</sub> and not the current equilibrium output of Q<sub>1</sub>, what does S<sub>2</sub> represent? A) the market supply curve reflecting private cost B) the market supply curve reflecting social cost C) the market supply curve reflecting external cost D) the market supply curve reflecting implicit cost
-Refer to Figure 15-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S2 represent?


A) the market supply curve reflecting private cost
B) the market supply curve reflecting social cost
C) the market supply curve reflecting external cost
D) the market supply curve reflecting implicit cost

Correct Answer:

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