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Help Save & Use the following supply and demand graph to answer the question below Quantity S1 and D1 represent the current m
Help Save & Exit Sut Use the following supply and demand graph to answer the question below. D. Quantity 51 and Dj represent
1 Multiple Choice • benefits from production and external costs from consumption of the product. 0 costs from production and
0 0
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Answer #1

Here the social optimal quantity ( C ) is greater than market equilibrium quantity ( A ) . So there is positive externality present . In free market conditions such goods are under produced . Here both supply and demand curve has shifted right ( or increased ) . So we can say that there are external benefits from production and consumption of the product , hence both supply and demand has risen . Answer : C

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