Refer to the Diagram in Which S Is the Market

Multiple Choice

Refer to the diagram in which S is the market supply curve and S₁ is a supply curve comprising all costs of production, including external costs.Assume that the number of people affected by these external costs is large.Without government interference, this market will result in:

A) an optimal allocation of society's resources.
B) an under-allocation of resources to this product.
C) an over-allocation of resources to this product.
D) a higher price than is consistent with an optimal allocation of resources.