Economics 9708 · AS & A Level · Externalities

Externalities — practice question

The diagram illustrates positive and negative externalities arising from production and consumption. Which row correctly identifies the production and consumption externality when economic welfare is maximised?

  • Aposition of economic welfare: X; production externality: negative; consumption externality: negative
  • Bposition of economic welfare: Y; production externality: positive; consumption externality: negative
  • Cposition of economic welfare: X; production externality: negative; consumption externality: positive
  • Dposition of economic welfare: Y; production externality: positive; consumption externality: positive

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