Economics (AS & A Level) · Oct / Nov 2024 · Paper 32 · Question 8
9708Private costs and benefits, externalities and social costs and benefits
The diagram shows the marginal private benefit (MPB), the marginal private cost (MPC) and the marginal social cost (MSC) for firms in an industry. The equilibrium price is point X. What should happen to achieve allocative efficiency?
- Aa decrease in consumption and an increase in price
- Ba decrease in production and no change in price
- Can increase in consumption and a decrease in production
- Dan increase in price and no change in production
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Correct answer: A. a decrease in consumption and an increase in price
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