(Figure: Market with External Cost) Suppose that the figuredisplays the demand and supply curves for dry cleaning, aservice that creates pollution. The external cost of dry cleaningis: A)P₂. B)P₁ - P0. C)P0. D)P₂ - P0.

Question

Quizplus · Accepted Answer

The external cost of dry cleaning is the difference between the social cost (P₂) and the private cost (P0), which is P₂ - P0.

(Figure: Market with External Cost) Suppose That the Figuredisplays the Demand