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Air pollution creates a negative exterinality - a cost suffered by a third party as a result of an economic transaction. The article notes that

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Air pollution creates a negative exterinality - a cost suffered by a third party as a result of an economic transaction. The article notes that "putting a dollar value on the benefits of cleaner air has been difficult." Assuming this problem has been resolved, in the accompanying diagram, label each numbered line. Also, assume that there are no positive externalities in the market. A Line 1 A. Marginal private cost Line 2 B. Tax Line 3 Marginal social cost Line 1 Line 2 A. Marginal private cost B. Tax C. Marginal social cost D. Marginal external benefit E. Subsidy F. Quota G. Marginal social benefit

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