Question

Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?

Short answer

Price and quantity with and without external cost should be known before determining external cost.

Step-by-step solution

Introduction

External cost - Third-party charges are referred to as external costs.

Explanation

To calculate the external cost, you must first determine the current market price and quantity of the goods. Carbon emissions are produced as a result of the product's manufacturing, which are mixed with the air and ingested by a large number of people, making them sick. This is an example of a negative externality. Negative externality always raises the price since the government levies a pollution levy on the producer. and supply falls, resulting in a decrease in supply and an increase in price after costs are factored in.

So, in order to calculate external costs, you'll need to know the price and quantity with and without external costs.