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Add the marginal external costs to your diagram. Then find out the full-cost supply curve and add that to your diagram. Remember that, in this case, we first add (marginal) costs, not quantities, since these are the costs associated with each t-shirt. Finally, use the full-cost supply curve and the demand curve to find the efficient price and quantity. Show these on your diagram.

Microeconomics, Economics

  • Category:- Microeconomics
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