Use the Following to Answer Question(s): Correcting for Market Failure

Multiple Choice

Use the following to answer question(s) : Correcting for Market Failure: External Cost

-(Exhibit: Correcting for Market Failure: External Cost) Assume that there is an external cost involved, as illustrated in the exhibit.If the government sector forces the private sector firms to face the external cost, the supply curve _______ from _______ to ________ .

A) shifts right; S₂; S₁
B) shifts left; S₁; S₂
C) remains unchanged; S₁; S₁
D) remains unchanged; S₂; S₂