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

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When the government intervenes to correct for an external cost, the new supply curve (S2) will reflect both private and external costs, internalizing the externality.

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