-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, there is an
A) external marginal benefit of $2.
B) external marginal cost of $2.
C) external marginal benefit of $1.
D) external marginal cost of $3.

Question

-In the above figure, if no government intervention occurs, at the unregulated competitive market equilibrium, there is an
A) external marginal benefit of $2. 
B) external marginal cost of $2. 
C) external marginal benefit of $1. 
D) external marginal cost of $3.

Quizplus · Accepted Answer

The correct answer is A because at the unregulated competitive market equilibrium, the price is $2 and the quantity is 10. The external marginal benefit is the difference between the social value of the good and the private value of the good. In this case, the social value of the good is $4 and the private value of the good is $2, so the external marginal benefit is $2.

-In the Above Figure, If No Government Intervention Occurs, at the Unregulated