Use the following to answer question: Figure: Correcting for Market Failure -(Figure: Correcting for Market Failure)Use Figure: Correcting for Market Failure.There is an external cost in the market illustrated in the figure,and the two upward-sloping lines reflect private and social marginal costs.If the government intervenes to correct for the external cost,the new _____ will now reflect _____ costs. A)supply curve S₁;both private and external B)supply curve S₂;private but not external C)supply curve S₂;both private and external D)demand curve (not shown);external but not private

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When the government intervenes to correct for the external cost, the new supply curve will reflect both the private and external costs. This is shown in the figure where the new supply curve is S₂. The original supply curve reflected only private costs, but the new curve reflects the full cost to society, including the external cost.

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