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 minimum at Q0,because MCS exceeds MCP.
B) at a maximum at Q0,because that is where MCS equals MBS.
C) at a maximum at Q1,because that is where MCS equals MBS.
D) zero at Q0,because that is where MCS equals MBS.
E) zero at Q2,because that is where the externality is fully maximized.
Correct Answer:
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