Question

what is the per unit size of the negative externality in this market? - a) $3 - b) $6 - c) $12 - d) $9

Explanation:

Step1: Recall negative - externality concept

The size of the per - unit negative externality is the vertical distance between the private cost curve (S) and the social cost curve (SC) at the market equilibrium quantity.

Step2: Identify equilibrium quantity and vertical distance

The market equilibrium occurs where the private supply curve (S) intersects the demand curve (D), which is at a quantity of 9 units. At a quantity of 9 units, the price on the private - cost curve (S) is $9 and the price on the social - cost curve (SC) is $12. The vertical distance between the two curves at this quantity is $12 - $9=$3.

Answer:

A. $3