The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below.   Price Quantity Demanded Quantity Supplied without Paying Social Costs Quantity Supplied after Paying Social Costs 100 0 120 75 80 10 100 50 55 30 90

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A: Negative production externality occurs when the action of a supplier or a producer affects the third…

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