Figure 10-2

-Refer to Figure 10-2.What is this market experiencing
A)government intervention
B)a positive externality
C)a negative externality
D)a technology spillover

Question

Figure 10-2
 
-Refer to Figure 10-2.What is this market experiencing
A)government intervention 
B)a positive externality 
C)a negative externality 
D)a technology spillover

Quizplus · Accepted Answer

The graph shows that the social cost (MC + external cost) is greater than the private cost (MC) at the output level where the demand (MB) curve intersects with the supply (MC) curve. This indicates a negative externality, where the production and consumption of the good creates costs that are borne by third parties who are not compensated for it.

Figure 10-2 -Refer to Figure 10-2.What Is This Market Experiencing