An externality affecting supply can be measured graphically as the

Question

Quizplus · Accepted Answer

An externality affecting supply occurs when the production of a good or service affects the well-being of others and leads to a divergence between social costs and private costs. This causes the supply curve to shift, where the social supply curve is shifted to the left of the market supply curve (assuming negative externality). The vertical distance between the market supply curve and the social supply curve represents the magnitude of the externality and the costs imposed on society beyond those paid by the producer. Therefore, the correct answer is D, the vertical distance between the market supply curve and the social supply curve.

An Externality Affecting Supply Can Be Measured Graphically as the