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Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream
Consider the market for bolts. Suppose that a hardware factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional tonne of bolts imposes a constant external cost of $45 per tonne. The following graph shows the private demand (private value) curve and the private supply (private cost) curve for bolts.
Use the purple points (diamond symbol) to plot the social supply curve (supply curve with external costs) when the external cost is $45 per tonne.
300 270 O 240 9SOCIAL 210 O S_ PRIVATE 180 (Private Cost) PRICE (Dollars per tonne of bolts) 150 120 90 60 O O D.. PRIVATE 30 (Private Value) 1 2 3 5 QUANTITY (Tonnes of bolts)Step by Step Solution
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