Figure 5-5 Figure 5-5 Shows a Market with an Externality

Multiple Choice

Figure 5-5 Figure 5-5 shows a market with an externality. The current market equilibrium output of Q₁ is not the economically efficient output. The economically efficient output is Q₂.
-Refer to Figure 5-5. Suppose the current market equilibrium output of Q₁ is not the economically efficient output because of an externality. The economically efficient output is Q₂. In that case, diagram shows

A) the effect of a subsidy granted to producers of a good.
B) the effect of an excess demand in a market.
C) the effect of a positive externality in the consumption of a good.
D) the effect of a negative externality in the consumption of a good.