Exhibit 31-1

-Refer to Exhibit 31-1.If the exhibit represents a negative externality situation,the triangle ABC is representative of

Question

Exhibit 31-1
 
-Refer to Exhibit 31-1.If the exhibit represents a negative externality situation,the triangle ABC is representative of

Quizplus · Accepted Answer

The triangle ABC represents deadweight loss, which is a result of market failure in the presence of negative externalities. The socially optimal output would be where the marginal social cost (MSC) intersects with the demand curve (D), while in this case, the market output is where the marginal private cost (MPC) intersects with the demand curve (D). The difference between the two outputs is the deadweight loss (represented by triangle ABC), indicating that the market outcome is not socially efficient. Thus, the answer is C, market failure.

Exhibit 31-1 -Refer to Exhibit 31-1.If the Exhibit Represents a Negative Externality