Principles of Microeconomics
Principles of Microeconomics
Draw a supply-and-demand diagram to explain the effect of a negative externality that occurs as a result of a firm’s production process.
The effect of negative externality that occurs as a result of a firm’s production process is explained with the help of a diagram, as shown below:
Figure 1 shows the effect of externality.
In Figure 1, the vertical axis measures price and the horizontal axis measures quantity. Here, the equilibrium point is the intersecting point of demand and supply...
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