Narrbegin Exhibit 10.2 Carbon emissions as an externality
-In Exhibit 10.2, if the external cost is not included in the supply curve 'Supply 1', the market demand and market supply curve 'Supply 1' produce a/an:

Question

Narrbegin Exhibit 10.2 Carbon emissions as an externality  
-In Exhibit 10.2, if the external cost is not included in the supply curve 'Supply 1', the market demand and market supply curve 'Supply 1' produce a/an:

Quizplus · Accepted Answer

When the external cost is not included in the supply curve, the equilibrium point shifts to the left and the quantity demanded exceeds the quantity supplied, resulting in an inefficient outcome. This means that the market is producing less than the socially optimal level of output, leading to deadweight loss in the economy. Therefore, choice C is the correct answer. Choice A and B are incorrect as they imply a socially optimal outcome. Choice D is incorrect as it is unclear which intersection of market demand and Supply 2 it is referring to and how it is better than the given scenario.