The marginal social cost of a good is equal to marginal private cost of producing it plus any marginal external costs imposed on third parties by its production.

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This is a basic principle in economics known as the Coase Theorem, which states that in the absence of transaction costs, parties can negotiate and find the efficient outcome where the marginal social cost is equal to the marginal social benefit.

The Marginal Social Cost of a Good Is Equal to Marginal