Questions: Which prices and quantities represent the market and efficient equilibria? P1 and Q1 are both the market and the efficient price and quantity. P2 and Q0 are both the market and the efficient price and quantity. P1 and Q1 are the market price and quantity, and P2 and Q0 are the efficient price and quantity. P 2 and Q 0 are the market price and quantity, and P1 and Q1 are the efficient price and quantity.

Which prices and quantities represent the market and efficient equilibria?
P1 and Q1 are both the market and the efficient price and quantity.
P2 and Q0 are both the market and the efficient price and quantity.
P1 and Q1 are the market price and quantity, and P2 and Q0 are the efficient price and quantity.
P 2 and Q 0 are the market price and quantity, and P1 and Q1 are the efficient price and quantity.

Transcript text: Which prices and quantities represent the market and efficient equilibria? P1 and Q1 are both the market and the efficient price and quantity. P2 and Q0 are both the market and the efficient price and quantity. P1 and Q1 are the market price and quantity, and P2 and Q0 are the efficient price and quantity. P 2 and Q 0 are the market price and quantity, and P1 and Q1 are the efficient price and quantity.

Solution

Solution Steps

Step 1: Identify the market equilibrium.

The market equilibrium is where the private supply curve (labeled "Supply (Private Cost)") intersects the demand curve. This occurs at price P1 and quantity Q1.

Step 2: Identify the efficient equilibrium.

The efficient equilibrium is where the social cost curve intersects the demand curve. This occurs at price P2 and quantity Q0.