When Firms Internalize a Negative Externality, the Market Supply Curve

question 124

True/False

When firms internalize a negative externality, the market supply curve shifts to the left.

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Definitions:

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced; it decreases as production increases.

Market Price

The current price at which an asset or service can be bought or sold in the marketplace.

Marginal Revenue

is the additional income generated from selling one more unit of a product or service, crucial for understanding profitability and making production decisions.

Economic Profit

The difference between total revenue and total costs, including both explicit and opportunity costs, reflecting the additional gain or loss from a business decision.