Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. We can conclude that the government is correcting for
A. positive externalities in both diagrams.
B. negative externalities in diagram (a) and positive externalities in diagram (b).
C. negative externalities in both diagrams.
D. positive externalities in diagram (a) and negative externalities in diagram (b).
Answer: B. negative externalities in diagram (a) and positive externalities in diagram (b).
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