Multiple Choice
Figure 4.5.1
-Refer to Figure 4.5.1 above. When demand increases from #1 to D2,
A) the pure price effect moves the market from A to B, and the externality effect from B to C.
B) the pure price effect moves the market from B to C, and the externality effect from A to B.
C) the pure price effect moves the market from A to C, and the externality effect from C to B.
D) the pure price effect moves the market from A to B, and the externality prevents the move from B to C.
Correct Answer:
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