Question

The following graph shows the demand and supply curves for a good with this type of externality. What do the dashed drop lines on the graph reflect?

1) Market equilibrium price and quantity
2) Demand curve
3) Supply curve
4) Externality

Answer 1

The dashed drop lines on the graph reflect the market equilibrium price and quantity.

Step-by-step explanation:

The dashed drop lines on the graph reflect the market equilibrium price and quantity.

Market equilibrium occurs when the quantity demanded by consumers is equal to the quantity supplied by producers. At this point, there is no shortage or surplus in the market, and the price and quantity are determined by the intersection of the demand and supply curves. The dashed drop lines represent the point where these two curves intersect, indicating the equilibrium price and quantity.