Demanded

Pollution Cost

Pollution Cost

$600 50,000

$650 45,000

$700 40,000

$750 35,000

$800 30,000

$850 25,000

$900 20,000

40,000

45,000

50,000

55,000

60,000

65,000

70,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

TABLE 12.2 A Supply Shift Caused by Pollution Costs

However, as a by-product of the metals, plastics, chemicals and energy that refrigerator manufacturers use,

some pollution is created. Let’s say that, if these pollutants were emitted into the air and water, they would

create costs of $100 per refrigerator produced. These costs might occur because of adverse effects on human

health, property values, or wildlife habitat, reduction of recreation possibilities, or because of other negative

impacts. In a market with no anti-pollution restrictions, firms can dispose of certain wastes absolutely free.

Now imagine that firms which produce refrigerators must factor in these external costs of pollution—that is,
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