-Refer to the above figure. An external cost exists. The amount of that cost is represented by
A)P₂.
B)Q₁.
C)the vertical distance between point A and the supply curve S₁.
D)the distance between C and A.

Question

-Refer to the above figure. An external cost exists. The amount of that cost is represented by
A)P₂. 
B)Q₁. 
C)the vertical distance between point A and the supply curve S₁. 
D)the distance between C and A.

Quizplus · Accepted Answer

The external cost is represented by the vertical distance between the social cost curve (point A) and the private supply curve (S₁), indicating the additional cost not accounted for by the private market.

-Refer to the Above Figure