The Diagram Below Shows Demand and Supply Curves for Some

Multiple Choice

The diagram below shows demand and supply curves for some perfectly competitive market. FIGURE 16-2
-Refer to Figure 16-2.Suppose that the marginal benefit curve (MB) includes all social benefits and that there is a positive externality in production.In this case,________ for allocative efficiency.

A) P₁ and Q₁ are appropriate
B) the price P₁ is appropriate but the quantity Q₁ is too low
C) the price P₁ is appropriate but the quantity Q₁ is too high
D) the price P₁ is too low and the quantity Q₁ is too high
E) the price P₁ is too high and the quantity Q₁ is too low