The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on thegraph reflect the market equilibrium price and quantity for this good.Suppose that a negative externality arises as a result of the production of this good.Adjust the following graph by shifting one of the curves to reflect the presence of the negative externality.PRICE AND COSTgreaterlessThe market output is greaterQUANTITYSupplyDemandthan the socially optimal output.DemandSupply(?

Negative externalities occur when a transaction has a cost that neither the buyer nor the seller is…

Answered: PRICE AND COST I I I I I greater less…

PRICE AND COST I I I I I greater less The market output is greater QUANTITY Demand than the socially optimal output. Demand Supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on the
graph reflect the market equilibrium price and quantity for this good.
Suppose that a negative externality arises as a result of the production of this good.
Adjust the following graph by shifting one of the curves to reflect the presence of the negative externality.
PRICE AND COST
greater
less
The market output is greater
QUANTITY
Supply
Demand
than the socially optimal output.
Demand
Supply
(?

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