Question

refer to figure 10 - 4. how is the negative externality measured?
$p_{3}-p_{1}$
$p_{2}-p_{1}$
$p_{3}-p_{0}$
$p_{3}-p_{2}$

Explanation:

Step1: Understand negative externality

Negative externality is the difference between social cost and private cost at the market - equilibrium quantity.

Step2: Analyze the graph

At quantity \(Q_1\) (the quantity where demand and private cost intersect, representing the market - equilibrium quantity in a situation without considering the externality), the social cost is \(P_3\) and the private cost is \(P_2\).

Answer:

\(P_3 - P_2\)