The diagram below shows the private and social marginal costs (MCP and MCS) and the social marginal benefits (MBS) of producing disposable diapers.
FIGURE 17- 2
-Refer to Figure 17- 2.The net social benefit derived from the production and use of the last unit of disposable diapers is
A) at a maximum at Q0,because that is where MCS equals MBS.
B) zero at Q2,because that is where the externality is fully maximized.
C) at a minimum at Q0,because MCS exceeds MCP.
D) at a maximum at Q1,because that is where MCS equals MBS.
E) zero at Q0,because that is where MCS equals MBS.
Correct Answer:
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