-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit. Economists argue that in an unregulated private market _______ is produced and the supply curve (S₁) reflects ________ cost.

Question

Quizplus · Accepted Answer

In an unregulated private market, too much of a good is produced when there are external costs not accounted for by the private market. The supply curve in such a scenario reflects private costs, ignoring the external costs imposed on society.

-(Exhibit: Correcting for Market Failure: External Cost) Assume That There