Figure 5-4

Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s).
-Refer to Figure 5-4.What does S₁ represent?
A)the market supply curve that reflects social cost
B)the market supply curve that reflects only external cost
C)the market supply curve that reflects only private benefit
D)the market supply curve that reflects private cost

Question

Figure 5-4
  
Suppose there are several paper mills producing paper for a market. These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river. The waste material affects the number of fish in the river and the use of the river for recreation and as a public water supply source. Figure 5-4 shows the paper market. Use this Figure to answer the following question(s).
-Refer to Figure 5-4.What does S₁ represent?
A)the market supply curve that reflects social cost 
B)the market supply curve that reflects only external cost 
C)the market supply curve that reflects only private benefit 
D)the market supply curve that reflects private cost

Quizplus · Accepted Answer

S₁ represents the market supply curve that reflects private cost, as it typically includes the costs incurred by producers without accounting for externalities.

Figure 5-4 Suppose There Are Several Paper Mills Producing Paper for a Mills