Question

Table 12.5 provides the supply and demand conditions for a manufacturing firm. The third column represents a supply curve without accounting for the social cost of pollution. The fourth column represents the supply curve when the firm is required to account for the social cost of pollution. Identify the equilibrium before the social cost of production is included and after the social cost of production is included.

Short answer

Without social cost: $440$

With social cost:$410$

Step-by-step solution

Social cost : 

Social costs are costs that comprise both private costs spent by businesses and additional external costs imposed by third persons who are not involved in the manufacturing process.

Explanation :

The price would be $\$15$and the quantity would be $440$in the initial equilibrium before the external social cost of pollution. Once the supply curve overlaps the demand curve, it is determined. So when additional external expense of pollution is included in, production becomes more expensive, and the supply curve swings upward. The new equilibrium would be calculated using a price of $\$30$and a quantity of $410$as inputs. As a response of the price increase, the supply curve would eventually move to the left.