Refer to the figure below. In this case, the private market ________ resources efficiently because ________.
A)does not allocate; demand and supply do not cross at the market equilibrium
B)does not allocate; some of the costs of paper production do not fall on producers
C)allocates; firms are motivated to maximize profit
D)allocates; consumers are willing to pay the external cost of production

Question

Refer to the figure below. In this case, the private market ________ resources efficiently because ________.   
A)does not allocate; demand and supply do not cross at the market equilibrium 
B)does not allocate; some of the costs of paper production do not fall on producers 
C)allocates; firms are motivated to maximize profit 
D)allocates; consumers are willing to pay the external cost of production

Quizplus · Accepted Answer

The social MC curve lies above the private MC curve, indicating that there is an external cost associated with each ton of paper produced.

Refer to the Figure Below