Figure 151 Figure 15

Multiple Choice

Figure 15.1 Figure 15.1 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 15.1.If, because of an externality, the economically efficient output is Q₂ and not the current equilibrium output of Q₁, what does S₂ represent?

A) The market supply curve reflecting private cost
B) The market supply curve reflecting social cost
C) The market supply curve reflecting external cost
D) The market supply curve reflecting implicit cost