Figure 4-8 Figure 4-8 shows a market with an externality.The current market equilibrium output of Q 1 is not the economically efficient output.The economically efficient output is Q 2 . -Refer to Figure 4-8.If,because of an externality,the economically efficient output is Q₂ and not the current equilibrium output of Q₁,what does S₁ represent? A)the market supply curve reflecting external cost B)the market supply curve reflecting implicit cost C)the market supply curve reflecting social cost D)the market supply curve reflecting private cost

Question

Quizplus · Accepted Answer

S₁ represents the market supply curve reflecting private cost, as it does not account for the externality that leads to the economically efficient output being different from the current equilibrium output.

Figure 4-8 Figure 4-8 Shows a Market with an Externality.The