Exhibit 8-2
-Refer to Exhibit 8-2. If the suppliers of steel are not aware of or not responsible for the external costs, they will tend to:

Question

Exhibit 8-2 ​ 
-Refer to Exhibit 8-2. If the suppliers of steel are not aware of or not responsible for the external costs, they will tend to:

Quizplus · Accepted Answer

If the suppliers of steel are not aware of or not responsible for the external costs, they will tend to produce too much. This is because they are only considering their private costs (cost of producing steel) and not the social costs (impact on environment and people). Therefore, they will not take the negative externalities into account while making production decisions and will produce more than the socially optimal quantity (Q1 in this case).

Exhibit 8-2 ​

Exhibit 8-2