Question

Refer to Exhibit 31-4. If a negative externality exists, then curve __________ represents the marginal social cost curve and the area __________ represents the market failure.

Answer 1

Demand

Consumer interference

Step-by-step explanation:

The social demand curve represents the benefit of demand to the whole society whereas the normal demand curve represents the benefits to the consumers only. The demand curve represents the social cost curve and the market failure is analyzed by the customer interference.