Now let’s suppose that aluminum factories emit pollution. For each unit of aluminum produced a certain amount of smoke enters the atmosphere. Because this smoke creates a health risk for those who breathe the air it is a negative externality. How does this externality affect the efficiency of the market outcome. Because of the externality the cost to society of producing aluminum is larger than the cost to the aluminum producers. For each unit of aluminum produced the social cost includes the private cost of the aluminum producers plus the costs to those bystanders affected adversely by the pollution. The social cost of producing aluminum. The social-cost curve is above the supply curve because it takes into account the external costs imposed on society by aluminum producers. The difference between these two curves reflects the cost of the pollution emitted. What quantity of aluminum should be produced. To answer this questi...