Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 10 - Part IV - Externalities - Questions for Review - Page 212: 2

Answer

Before the negative externality, the market price and quantity were $P_{0}$ and $Q_{0}$, respectively.

Work Step by Step

However, with the negative externalities, the supply curve is shifted up. This decreases the optimum quantity to $Q_{1}$ and increases the optimum price to $P_{1}$.
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