FIGURE 6-2

-Refer to Figure 6-2. If the all the costs of production are internalized, what will the equilibrium price and quantity be?
A) P₁ and Q₀
B) P₀ and Q₀
C) P₂ and Q₁
D) P₀ and Q₀.

Question

FIGURE 6-2
 
-Refer to Figure 6-2. If the all the costs of production are internalized, what will the equilibrium price and quantity be?
A) P₁ and Q₀ 
B) P₀ and Q₀ 
C) P₂ and Q₁ 
D) P₀ and Q₀.

Quizplus · Accepted Answer

With internalized production costs, the supply curve shifts up to S₂, intersecting demand curve at point E₂. This results in a higher equilibrium price (P₂) and lower equilibrium quantity (Q₁). Therefore, the correct choice is C.

FIGURE 6-2 -Refer to Figure 6-2. If the All the Costs of All