The optimal quantity of a negative externality is zero if:
A)it imposes a high enough cost on society.
B)it is costly for people to negotiate with each other.
C)the majority of voters decide to eliminate the externality.
D)the marginal cost of reducing the externality is zero.

Question

Quizplus · Accepted Answer

An action should be taken only as long as the additional benefit exceeds the additional cost. If the marginal cost of reducing a negative externality is zero, then the externality should be reduced until the marginal benefit of reducing the externality is zero, which occurs when the externality is completely eliminated.

The Optimal Quantity of a Negative Externality Is Zero If