Figure 10-1
This figure reflects the market for outdoor concerts in a public park surrounded by residential neighbourhoods.

-Refer to Figure 10-1.What does the difference between the social cost curve and the supply curve reflect

Question

Figure 10-1
This figure reflects the market for outdoor concerts in a public park surrounded by residential neighbourhoods.
 
-Refer to Figure 10-1.What does the difference between the social cost curve and the supply curve reflect

Quizplus · Accepted Answer

The difference between the social cost curve and the supply curve reflects the cost of spillover effects from the concert, such as noise and traffic, which is a negative externality imposed on the surrounding residential neighbourhoods. The social cost curve reflects the true cost of the concert, considering the negative externalities, while the supply curve only reflects the private cost of organizing the concert. Thus, B is the correct answer. A is incorrect because the profit margin is determined by the difference between the price and the cost of organizing the concert, which is not related to the social cost curve. C is incorrect because while the social cost curve reflects the negative externalities, it does not necessarily reflect the value of concerts to society as a whole. D is incorrect because the amount of subsidy required would depend on various factors, such as the supply and demand conditions, cost structure, and policy objectives, which cannot be determined based solely on the difference between the social cost curve and the supply curve.

Figure 10-1 This Figure Reflects the Market for Outdoor Concerts in a in a Public