only their private costs into account and they are allowed to emit pollution at zero cost. The market
equilibrium (E0), where quantity supplied equals quantity demanded, is at a price of $650 per refrigerator and
a quantity of 45,000 refrigerators. Table 12.2 reflects this information in the first three columns.
284 12 • Environmental Protection and Negative Externalities

FIGURE 12.2 Taking Social Costs into Account: A Supply Shift If the firm takes only its own costs of production into
account, then its supply curve will be Sprivate, and the market equilibrium will occur at E0. Accounting for additional
external costs of $100 for every unit produced, the firm’s supply curve will be Ssocial. The new equilibrium will occur
at E1.

Price

Quantity

Quantity Supplied before Considering

Quantity Supplied after Considering

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
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