Figure 4-19
Figure 4-19 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 4-19.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
A) the effect of a subsidy granted to producers of a good.
B) the effect of an excess demand in a market.
C) the effect of a positive externality in the consumption of a good.
D) the effect of a negative externality in the consumption of a good.

Question

Figure 4-19
  Figure 4-19 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 4-19.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
A) the effect of a subsidy granted to producers of a good. 
B) the effect of an excess demand in a market. 
C) the effect of a positive externality in the consumption of a good. 
D) the effect of a negative externality in the consumption of a good.

Quizplus · Accepted Answer

A positive externality in consumption means the socially optimal output (Q₂) is higher than the market equilibrium output (Q₁), as the market fails to account for the external benefits.

Figure 4-19 Figure 4-19 Shows a Market with an Externality