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Consider the market for paper

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Consider the market for paper. Suppose that a paper factory dumps toxic waste into a nearby river, creating a negative externality for those living downstream from the factory. Producing an additional ton of paper imposes a constant external cost of $210 per ton. The following graph shows the demand (private value) curve and the supply (private cost) curve for paper. Use the purple points (diamond symbol) to plot the social cost curve when the external cost is $210 per ton. 700 630 Social Cost 560 490 420 O PRICE (Dollars per ton of paper) 350 O Supply (Private Cost) 280 Demand (Private Value) 210 I 140 70 0 0 + 1 0 6 7 2 3 4 5 QUANTITY (Tons of paper)