(Figure: Nail Polish Externalities) Based on the figure, S_p (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. S_s (MSC) includes the cost of that toxicity borne by others. What is the socially optimal quantity of this nail polish?

Question

(Figure: Nail Polish Externalities) Based on the figure, S<sub>p</sub> (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. S<sub>s</sub> (MSC) includes the cost of that toxicity borne by others. What is the socially optimal quantity of this nail polish? A) Q<sub>1</sub> B) Q<sub>2</sub> C) 0 D) It is unknown.

Quizplus · Accepted Answer

The Answer of (Figure: Nail Polish Externalities) Based on the figure, S_p (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. S_s (MSC) includes the cost of that toxicity borne by others. What is the socially optimal quantity of this nail polish?

(Figure: Nail Polish Externalities) Based on the Figure, Sp (MPC)

(Figure: Nail Polish Externalities) Based on the Figure, S_p (MPC)