Figure 10-4
-Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be
A) Q1.
B) Q2.
C) Q3.
D) Q4.

Question

Figure 10-4 
-Refer to Figure 10-4. If all external costs were internalized, then the market's equilibrium output would be
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Quizplus · Accepted Answer

When external costs are internalized, the market's equilibrium output is reduced to the socially optimal level, which is typically less than the unregulated market output. Q2 represents this reduced output level.

Figure 10-4 -Refer to Figure 10-4. If All External Costs Were Internalized