FIGURE 16-1 -Refer to Figure 16-1.Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC₁ and MB₀,respectively,then the competitive equilibrium quantity is A)too low for allocative efficiency. B)too high for allocative efficiency. C)consistent with allocative efficiency. D)not enough information to determine allocative efficiency.

Question

Quizplus · Accepted Answer

The competitive equilibrium quantity is too high for allocative efficiency because the social marginal cost (MC1) is higher than the private marginal cost, indicating a negative externality.

FIGURE 16-1 -Refer to Figure 16-1.Suppose That the Perfectly Competitive Market with Market