-Graphically, the presence of an external cost that is ignored by producers can be shown as
A) a market supply curve to the left of the market supply curve for where the producers have to pay for the external cost.
B) a market supply curve to the right of the market supply curve for which the producers have to pay for the external cost.
C) a market supply curve the same as the market supply curve for which the producers have to pay for the external cost.
D) the absence of a market supply curve.

Question

-Graphically, the presence of an external cost that is ignored by producers can be shown as
A) a market supply curve to the left of the market supply curve for where the producers have to pay for the external cost. 
B) a market supply curve to the right of the market supply curve for which the producers have to pay for the external cost. 
C) a market supply curve the same as the market supply curve for which the producers have to pay for the external cost. 
D) the absence of a market supply curve.

Quizplus · Accepted Answer

When producers ignore an external cost, they do not account for the full cost of production, leading to a market supply curve that is positioned to the right of where it would be if they had to internalize and pay for the external cost. This is because ignoring the external cost makes production seem cheaper than it actually is, encouraging more supply at each price level than if the cost were accounted for.

-Graphically, the Presence of an External Cost That Is Ignored