If the social costs of an economic activity are $120 and the private costs are $75,then the external costs of the activity are ________,and market failure ________.

Question

Quizplus · Accepted Answer

External costs are calculated by subtracting private costs from social costs, which equals $45 ($120 - $75). Market failure occurs when the social costs of an activity are not fully covered by the private costs, leading to a situation where the market does not efficiently allocate resources due to the presence of externalities.

If the Social Costs of an Economic Activity Are $120