What would be the Nash equilibrium of this simultaneous game?

Refer to Figure 5-5. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does D1 represent?

A) the demand curve reflecting social benefits B) the demand curve reflecting the sum of private and social benefits C) the demand curve reflecting private benefits D) the demand curve reflecting external benefits

Externalities

A) are not reflected in market prices, so they can be a source of economic inefficiency. B) do become reflected in market prices, so they can be a source of economic inefficiency. C) are not reflected in market prices, so they do not adversely affect economic efficiency. D) do become reflected in market prices, so they do not adversely affect economic efficiency. E) may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event.