Which quantity represents the sociallyoptimal quantity of ou

Which quantity represents the socially-optimal quantity of output in this market? One possible solution to the externality represented in the graph is to:

Solution

23. Option B i.e. Q^{1 .}

graph represents negative externality because the social cost curve is above the supply curve. Market equilibrium quantity is Q which only considers production costs, but the social optimal quantity is Q¹

24. Option A i.e. \"Impose a tax amounting to the external cost per unit of output\". This will increase the price and also will make market outcome efficient.