Figure 4-9 Figure 4-9 shows a market with a negative externality.
-Refer to Figure 4-9.The efficient output level is
A)Qd.
B)Qb.
C)Qa.
D)Qb - Qd.

Question

Figure 4-9  Figure 4-9 shows a market with a negative externality.
-Refer to Figure 4-9.The efficient output level is
A)Qd. 
B)Qb. 
C)Qa. 
D)Qb - Qd.

Quizplus · Accepted Answer

The efficient output level is where the marginal social cost (MSC) equals the marginal social benefit (MSB). In this case, the MSC curve is shifted upward from the supply curve (MC), indicating a negative externality. The MSB curve intersects the demand curve (MB) at point Qa, which is the efficient output level. This is where the additional benefit to society from producing one more unit of the good is equal to the additional cost incurred by society. Therefore, the best choice is C, Qa, as it represents the socially optimal level of output.

Figure 4-9 Figure 4-9 Shows a Market with a Negative