External costs are modeled by creating a new social cost curve that is
A)lower than the original supply curve.
B)higher than the original supply curve.
C)lower than the original demand curve.
D)higher than the original demand curve.

Question

Quizplus · Accepted Answer

External costs are additional costs that are not included in the supply and demand curves. When external costs are added, the cost of production increases and the supply curve shifts upward, resulting in a new social cost curve that is higher than the original supply curve. Therefore, external costs are best represented by a social cost curve that is higher than the original supply curve.

External Costs Are Modeled by Creating a New Social Cost