Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to
S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. We can conclude that the
Government is correcting for
A) negative externalities in diagram (a) and positive externalities in diagram (b).
B) positive externalities in diagram (a) and negative externalities in diagram (b).
C) negative externalities in both diagrams.
D) positive externalities in both diagrams.

Question

Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to
S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. We can conclude that the
Government is correcting for
A) negative externalities in diagram (a) and positive externalities in diagram (b). 
B) positive externalities in diagram (a) and negative externalities in diagram (b). 
C) negative externalities in both diagrams. 
D) positive externalities in both diagrams.

Quizplus · Accepted Answer

The Answer of  Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to
S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. We can conclude that the
Government is correcting for
A) negative externalities in diagram (a) and positive externalities in diagram (b). 
B) positive externalities in diagram (a) and negative externalities in diagram (b). 
C) negative externalities in both diagrams. 
D) positive externalities in both diagrams.

Refer to the Diagrams for Two Separate Product Markets