Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The size of marginal external costs can be determined by
A)S2 + S1 at each output level.
B)S2 - S1 at each output level.
C)the supply curve S2.
D)the supply curve S1.

Question

Figure 5-2 shows a market with a negative externality.
-Refer to Figure 5-2.The size of marginal external costs can be determined by
A)S2 + S1 at each output level. 
B)S2 - S1 at each output level. 
C)the supply curve S2. 
D)the supply curve S1.

Quizplus · Accepted Answer

The size of marginal external costs can be determined by the vertical distance between the supply curves (S2 - S1) at each output level. Therefore, the correct choice is B.

Figure 5-2 Shows a Market with a Negative Externality