This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3
-Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the
A)profit margin of each concert.
B)cost of spillover effects from the concert (e.g., noise and traffic).
C)value of concerts to society as a whole.
D)amount by which the city should subsidize the concert organizers.

Question

This figure reflects the market for outdoor concerts in a public park surrounded by residential neighborhoods.
Figure 10-3 
-Refer to Figure 10-3. The difference between the social cost curve and the supply curve reflects the
A)profit margin of each concert. 
B)cost of spillover effects from the concert (e.g., noise and traffic). 
C)value of concerts to society as a whole. 
D)amount by which the city should subsidize the concert organizers.

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. This is known as externalities, which are costs or benefits of a transaction that affect people who are not directly involved in it. In this case, the externalities are negative, as they impose costs on the surrounding residents. Therefore, the difference between the social cost and supply curves represents the cost to society of these externalities.

This Figure Reflects the Market for Outdoor Concerts in a Public