Final answer:
The dealer's cost of the refrigerator is $657, calculated by dividing the selling price by the market markup. The reference information provided pertains to the economics of externalities and how pollution costs affect market prices and supply curves.
Step-by-step explanation:
The dealer's cost for the refrigerator is $657, considering the selling price is $821.25 and the market markup is 25% of the dealer cost. This is calculated by dividing the selling price by 1.25 (100% + 25% markup). However, this explanation is not directly related to the provided reference information about external costs of pollution. Rather, this information addresses the concept of externalities in economics, where a firm must consider not just the private costs but also societal costs such as pollution.
The given scenario indicates that the price increased by only $50 when a $100 externality cost was imposed because these costs do not always translate fully into price increases due to various economic factors, such as demand elasticity, market structure, and the firm's ability to absorb some costs internally to maintain their competitive position. Essentially, the external costs led to a higher production cost, shifting the supply curve up, as shown in Table 12.2 and Figure 12.2, indicating the need to receive a price of $700 to cover the increased costs.