📚 Learning Guide
Externality Graphs in Economics
easy

In a graph representing negative externalities, what happens to the social cost curve compared to the private cost curve?

Master this concept with our detailed explanation and step-by-step learning approach

Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

It shifts to the left

B

It remains the same

C

It shifts to the right

D

It becomes horizontal

Understanding the Answer

Let's break down why this is correct

Answer

In a graph showing negative externalities, the social cost curve is higher than the private cost curve. This is because negative externalities, like pollution, impose additional costs on society that the producer does not account for in their private costs. For example, if a factory pollutes a river, the private cost only includes the factory's expenses, but the social cost also includes the impact on people’s health and the environment. As a result, the social cost curve shifts upward, reflecting these extra costs. This difference highlights the need for policies to address these external costs and encourage more socially responsible production.

Detailed Explanation

The social cost curve shifts to the right. Other options are incorrect because Some might think the social cost decreases; It may seem like social costs are the same as private costs.

Key Concepts

externalities
Topic

Externality Graphs in Economics

Difficulty

easy level question

Cognitive Level

understand

Ready to Master More Topics?

Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.