The figure given below shows the demand and supply curves of steel.S_p is the private supply curve, and S_s is the social supply curve that includes both private costs and external costs. Figure 13.2 According to Figure 13.2:

Question

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Point a represents the socially efficient equilibrium where the social supply curve (S_s) intersects the demand curve (D). At this point, the marginal social cost (MSC) equals the marginal social benefit (MSB), including both private and external costs. Point b represents the private market equilibrium where the private supply curve (S_p) intersects the demand curve (D). At this point, the marginal private cost (MPC) equals the marginal private benefit (MPB), including only private costs. Therefore, point a represents the social equilibrium, whereas point b represents the private equilibrium. Thus, the correct choice is D. Note: The statement in option E is incorrect since the socially efficient output level depends on the magnitude of external costs.

The Figure Given Below Shows the Demand and Supply Curves