A shift from S 1 to S 2 reflects the change that happens when a negative externality is taken into account.A shift from D 1 to D 2 reflects the change that happens when a positive externality is taken into account.
-Refer to the above figures.A positive externality exists that has not been corrected.Price and quantity will be
A) $P _ { 1 }$ and $\mathrm { Q } _ { 1 }$ .
B) $P _ { 2 }$ and $\mathrm { Q } _ { 2 }$ .
C) $\mathrm { P } _ { 3 }$ and $\mathrm { Q } _ { 3 }$ .
D) $\mathrm { P } _ { 4 }$ and $\mathrm { Q } _ { 4 }$ .

Question

A shift from S 1 to S 2 reflects the change that happens when a negative externality is taken into account.A shift from D 1 to D 2 reflects the change that happens when a positive externality is taken into account.
-Refer to the above figures.A positive externality exists that has not been corrected.Price and quantity will be
A) $P _ { 1 }$ and $\mathrm { Q } _ { 1 }$ . 
B) $P _ { 2 }$ and $\mathrm { Q } _ { 2 }$ . 
C) $\mathrm { P } _ { 3 }$ and $\mathrm { Q } _ { 3 }$ . 
D) $\mathrm { P } _ { 4 }$ and $\mathrm { Q } _ { 4 }$ .

Quizplus · Accepted Answer

The positive externality means that the social value of the good is greater than the private value. The efficient quantity is Q3, where the social value equals the social cost. The price that equates supply and demand at Q3 is P3.

A Shift from S1 to S2 Reflects the Change That P1P _ { 1 }P1​

A Shift from S₁ to S₂ Reflects the Change That $P _ { 1 }$