Figure 5-5

Figure 5-5 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5-5.Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality.The economically efficient output is Q₂.In that case, diagram shows

Question

Figure 5-5
  
Figure 5-5 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5-5.Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality.The economically efficient output is Q₂.In that case, diagram shows

Quizplus · Accepted Answer

The economically efficient output being greater than the current market equilibrium output (Q₂ > Q₁) suggests a positive externality in consumption, where the social benefit is greater than the private benefit, leading to underconsumption at the market equilibrium.

Figure 5-5 Figure 5-5 Shows a Market with an Externality. the Current