Refer to the diagram of the market for product X. Curve Sₜ embodies all costs (including externalities), and Dₜ embodies all benefits (including externalities)associated with the production and consumption of X. Assuming the equilibrium output is Q₂, we can conclude that the existence of external
A)costs has resulted in an overallocation of resources to X.
B)benefits has resulted in an overallocation of resources to X.
C)costs has resulted in an underallocation of resources to X.
D)benefits has resulted in an underallocation of resources to X.

Question

Refer to the diagram of the market for product X. Curve Sₜ embodies all costs (including externalities), and Dₜ embodies all benefits (including externalities)associated with the production and consumption of X. Assuming the equilibrium output is Q₂, we can conclude that the existence of external
A)costs has resulted in an overallocation of resources to X. 
B)benefits has resulted in an overallocation of resources to X. 
C)costs has resulted in an underallocation of resources to X. 
D)benefits has resulted in an underallocation of resources to X.

Quizplus · Accepted Answer

The Answer of  Refer to the diagram of the market for product X. Curve Sₜ embodies all costs (including externalities), and Dₜ embodies all benefits (including externalities)associated with the production and consumption of X. Assuming the equilibrium output is Q₂, we can conclude that the existence of external
A)costs has resulted in an overallocation of resources to X. 
B)benefits has resulted in an overallocation of resources to X. 
C)costs has resulted in an underallocation of resources to X. 
D)benefits has resulted in an underallocation of resources to X.

Refer to the Diagram of the Market for Product X