Figure 4-16
Figure 4-16 shows a market with a negative externality.
-Refer to Figure 4-16.The efficient output level is

Question

Figure 4-16
  Figure 4-16 shows a market with a negative externality.
-Refer to Figure 4-16.The efficient output level is

Quizplus · Accepted Answer

The efficient output level is where the marginal social cost (MSC) equals the marginal social benefit (MSB), which occurs at Qₐ. At Qd, the marginal social cost is greater than the marginal social benefit, indicating a negative externality. At Qb, the marginal social benefit is greater than the marginal social cost, indicating a positive externality. Therefore, the efficient output level is Qₐ.

Figure 4-16 Figure 4-16 Shows a Market with a Negative