In the above figure, S1 represents the supply curve which includes private costs, and S2 is the supply curve which includes social costs. If the firm is producing a product that has external costs that the firm does NOT have to pay, what will be the equilibrium price and quantity?

A. P3, Q2
B. P1, Q4
C. P4, Q1
D. P2, Q3


Answer: D

Economics

You might also like to view...

What is a business cycle? What are its phases and turning points?

What will be an ideal response?

Economics

Opportunity costs are

A) always marginal costs. B) never marginal costs. C) not related to marginal costs. D) sometimes marginal costs. E) sunk costs.

Economics

Compared to a competitive industry, a monopoly transfers

A) deadweight loss away from producers to consumers. B) deadweight loss away from consumers to producers. C) producer surplus to consumers. D) consumer surplus to producers.

Economics

The Laffer curve shows that as tax rates increase

A) initially tax revenues increase, then decrease. B) tax revenues decrease as the incidence of cheating on tax returns increases. C) tax revenues increase as more individuals and businesses have to pay taxes. D) tax revenues remain unchanged.

Economics