Exhibit 30-1

-Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the net social cost of expanding output from Q₂ to Q₁ is the area of

Question

Exhibit 30-1 -Refer to Exhibit 30-1. If the exhibit represents a negative externality situation, the net social cost of expanding output from Q₂ to Q₁ is the area of

Quizplus · Accepted Answer

The net social cost of expanding output from Q2 to Q1 is the area of ABC because this area represents the difference between the private cost of production and the social cost of production. The private cost of production is the cost to the producer, while the social cost of production is the cost to society as a whole. In this case, the social cost of production is higher than the private cost of production because the producer does not take into account the negative externality that is created when output is expanded.

Exhibit 30-1 ​

Exhibit 30-1