Q. Draw a supply-and-demand diagram to explain the effect of a negative externality that occurs as a result of a firm’s production process.
- In the figure, the first formed in the absence of externalities, market equilibrium (balance volume) it can be seen that two. Negative externalities such as environmental pollution, and that caused the production, supply due to the supply curve moves up one can see that. Balance the supply curve also changes according to the movement of production to able the optimum point is moved.