Refer to the figure below. This diagram represents the tobacco industry. Which of the following would be included in the supply (private cost) curve?
A) the cost of labour
B) the cost to the government of the hospital expenses of smokers with cancer
C) the increased risk of cancer to the non-smoking passengers in the smoker's car pool
D) all of the above

Question

Refer to the figure below. This diagram represents the tobacco industry. Which of the following would be included in the supply (private cost) curve? 
A) the cost of labour 
B) the cost to the government of the hospital expenses of smokers with cancer 
C) the increased risk of cancer to the non-smoking passengers in the smoker's car pool 
D) all of the above

Quizplus · Accepted Answer

The supply (private cost) curve only includes the costs that are directly incurred by the producers, such as the cost of labour, materials, and equipment. The costs in options B and C are externalities that are not reflected in the supply curve.

Refer to the Figure Below