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A graph of price, P, versus quantity, Q, shows a supply curve, Private Cost, rising linearly, a second supply curve, Social Cost, rising linearly above
A graph of price, P, versus quantity, Q, shows a supply curve, Private Cost, rising linearly, a second supply curve, Social Cost, rising linearly above the first supply curve, and a demand curve, Private Value, descending linearly. A horizontal line extends from Q subscript 1 to a point on Curve Private Value to the left of the intersection of Curve Private Value and Curve Social Cost. A horizontal line extends from Q subscript 2 to the intersection of Curve Private Value and Curve Social Cost. A horizontal line extends from Q subscript 3, crossing through the intersection of Curve Private Value and Curve Private Cost and to a point on Curve Social Cost to the right of the intersection of Curve Social Cost and Curve Private Value. A horizontal line extends from Q subscript 4 to a point on Curve Social Cost to the right of the intersection of Curve Social Cost and Curve Private Value, and to the right of line Q subscript 3. Refer to Figure 10-2. This market is characterized by a. a positive externality. b. a price control. c. a negative externality. d. government intervention
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