Exhibit 17.3

-Refer to Exhibit 17.3,which shows market equilibrium in the presence of externality in an economy.The equilibrium price and output (determined exclusively by private decisions)are _____
A)$6 and 50 units, respectively.
B)$12 and 50 units, respectively.
C)$12 and 40 units, respectively.
D)$6 and 40 units, respectively.
E)less than $6 and more than 50 units, respectively.

Question

Exhibit 17.3
 
-Refer to Exhibit 17.3,which shows market equilibrium in the presence of externality in an economy.The equilibrium price and output (determined exclusively by private decisions)are _____
A)$6 and 50 units, respectively. 
B)$12 and 50 units, respectively. 
C)$12 and 40 units, respectively. 
D)$6 and 40 units, respectively. 
E)less than $6 and more than 50 units, respectively.

Quizplus · Accepted Answer

In the presence of an externality, the market equilibrium (where supply equals demand) is determined by the intersection of the supply and demand curves. The choice that corresponds to a price of $6 and an output of 50 units reflects a typical equilibrium point in such a scenario, assuming the externality does not shift the supply or demand curves from their standard positions.

Exhibit 17.3 -Refer to Exhibit 17.3,which Shows Market Equilibrium in the Presence