Refer to Figure 12-3. If all the costs of production are internalized, what will the equilibrium price and quantity be?
Understand the Problem
The question refers to a figure illustrating supply and demand for electrical power and asks for the equilibrium price and quantity if all production costs are internalized. To solve this, we need to analyze the intersection points of the supply and demand curves shown in the figure to determine the right answer.
Answer
P2 and Q1
The final answer is P2 and Q1.
Answer for screen readers
The final answer is P2 and Q1.
More Information
Internalizing all costs shifts the supply curve to S1, which represents the social cost. The equilibrium is then at the intersection with the demand curve.
Tips
Ensure you account for external costs when determining the new supply curve.
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