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The diagram below can be used to illustrate the effects of both positive and negative externalities associated with a particu

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Answer #1

Answer:

b.

explanation:

when there is a negative externality, the social cost of the  good exceeds the private cost. so the optimum quantity becomes smaller than the Equilibrium quantity. s2 curve above the S0 private cost shows the private cost plus the external cost. note that negative externality shifts the supply curve to the left along the demand curve while, positive externality shifts the demand curve to the right along the supply curve.

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