If,after an externality is corrected,the equilibrium price rises and the equilibrium quantity falls,the externality must have been a(n)
A) external benefit.
B) internal cost.
C) external cost.
D) positive externality.
E) positional externality.

Question

Quizplus · Accepted Answer

If the equilibrium price rises and the equilibrium quantity falls after correcting an externality, it implies that the cost of production has increased due to the correction of the externality, and as a result, the market has shifted leftward to a new equilibrium point. This indicates that the externality was a negative one, specifically an external cost. Therefore, the correct choice is C.

If,after an Externality Is Corrected,the Equilibrium Price Rises and the Equilibrium