Figure 5-2

Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The size of marginal external costs can be determined by

Question

Figure 5-2
  
Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The size of marginal external costs can be determined by

Quizplus · Accepted Answer

The size of marginal external costs can be determined by taking the difference between the supply curve S₂ (which represents private costs) and the supply curve S₁ (which includes external costs). Thus, the correct option is (B) S₂ - S₁ at each output level.

Figure 5-2 Figure 5-2 Shows a Market with a Negative Externality