When firms internalize a negative externality, the market supply curve shifts to the left.

Question

Quizplus · Accepted Answer

When firms internalize a negative externality, they take into account the external costs that their actions impose on others. This often leads to a decrease in production or an increase in production costs, which in turn causes the market supply curve to shift to the left, indicating a decrease in the quantity supplied at each price.

When Firms Internalize a Negative Externality, the Market Supply Curve