Dse 2016 doubt

[eco aspirant]

20170621_232325-1.jpg

How to solve this question ?

correct ans: d

[Seecha]

capital use by 1 producing negative eexternality on 2nd... so .... these are three solutions to this problem ... figure out .

[eco aspirant]

I got your point. Just want to seek one clarification. Firm 1 is producing negative externality is ascertained by the presence of  k1  in the denominator of the production function of firm 2 or is there any other logic for the same?

[Seecha]

I have applied same logic

[eco aspirant]

Thanks