When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.

Question

Quizplus · Accepted Answer

When negative externalities exist, the market supply curve only reflects the private costs of producing a good, but not the social costs borne by individuals outside of the transaction. Therefore, the competitive market supply curve does not include all the costs borne by members of society.

When Negative Externalities Exist, the Competitive Market Supply Curve Does