Question: In Figure 17.1, explain why area D + E + H is the externality cost difference between the social optimum and the private equilibrium? Figure

In Figure 17.1, explain why area D + E + H is the externality cost difference between the social optimum and the private equilibrium?
Figure 17.1: Welfare Effects of Pollution in a Competitive Market

450 MCS = MCP + MC9 MCP Ps = 282 C:D ec Pc =240 н 198 MCP MC9 84 ЕMCЯ 30 Demand 225 O = 84 O.= 105 Q, Tons of paper p

Social Optimum Private Change Consumer surplus, CS Private producer surplus, PS, Externality cost, C, Social producer su

450 MCS = MCP + MC9 MCP Ps = 282 C:D ec Pc =240 198 MCP MC9 84 MC 30 Demand 225 O = 84 O.= 105 Q, Tons of paper per day Price of paper, p. $per ton Social Optimum Private Change Consumer surplus, CS Private producer surplus, PS, Externality cost, C, Social producer surplus, PS, = PS, C, Welfare, W= CS + PS, A+ B+ C+D B+C+D B+ C+ F+ G F+ G+H -- C+ G C+D+E+ G+H D+E+H B+ F F-C- D-E -B - C-D-E A+ B+ F A+ B+ F- E -E = DWL

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