Figure 5-4 Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s). -Refer to Figure 5-4. What does S₂ represent? A) the market supply curve that reflects social cost B) the market supply curve that reflect private cost C) the market supply curve that reflects external cost D) the market supply curve that reflects social benefit

Question

Quizplus · Accepted Answer

S₂ represents the market supply curve that reflects social cost, which includes both private and external costs.

Figure 5-4 Suppose There Are Several Paper Mills Producing