Use the following diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs, to answer the question below.Assume that the number of people affected by these external costs is large. Without government interference, this market will reach a(n)

A. optimal allocation of society's resources.
B. overallocation of resources to this product.
C. higher price than is consistent with an optimal allocation of resources.
D. underallocation of resources to this product.

Answer: B