-Refer to the above figure. S1 is the supply curve that includes only private costs. S2 is the supply curve that includes social costs. If the firm sets output by focusing on private costs, the per-unit external cost will equal

Question

Quizplus · Accepted Answer

The per-unit external cost is the difference between the social cost and the private cost. In this case, the social cost is P4 and the private cost is P1. Therefore, the per-unit external cost is P4 - P1.

-Refer to the Above Figure