When government intervenes in the production process because external costs exist, it typically attempts to shift the industry's
A) demand curve to the right.
B) demand curve to the left.
C) supply curve to the right.
D) supply curve to the left.

Question

Quizplus · Accepted Answer

Government intervention in the production process due to external costs leads to an increase in the production costs of firms. This shift in costs leads to a leftward shift in the industry's supply curve. By doing so, the government aims to reduce the quantity of the good produced and consumed, leading to a reduction in the external costs associated with the production of the good.

When Government Intervenes in the Production Process Because External Costs