Use the following to answer questions: Figure: Correcting for Market Failure -(Figure: Correcting for Market Failure) There is an external cost in the market illustrated in the figure Correcting for Market Failure. If the government forces the private-sector firms to face the external cost: A) the supply curve shifts to the right, from S₂ to S₁. B) the supply curve shifts to the left, from S₁ to S₂. C) the supply curve is unaffected. D) price per unit decreases.

Question

Quizplus · Accepted Answer

When the government forces firms to internalize an external cost, the supply curve shifts to the left, reflecting the higher costs of production.

Use the Following to Answer Questions