FIGURE 16- 1
-Refer to Figure 16- 1. Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A. If the social marginal costs and social marginal benefits are represented by MC1 and MB0, respectively, then there exists
A) a positive external cost.
B) a negative external cost.
C) a positive external benefit.
D) a negative external benefit.
E) no externalities at all.
Correct Answer:
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