-The figure above illustrates the marginal private cost and the marginal social cost to the city of Geelong for each rock concert that is offered. If 5 concerts are put on, then the
A) marginal external cost will equal zero.
B) marginal external cost will be greater than the marginal social cost.
C) marginal external cost will equal the marginal private cost.
D) marginal external cost will be greater than the marginal private cost.
E) marginal social cost will equal the marginal external cost.

Question

-The figure above illustrates the marginal private cost and the marginal social cost to the city of Geelong for each rock concert that is offered. If 5 concerts are put on, then the
A) marginal external cost will equal zero. 
B) marginal external cost will be greater than the marginal social cost. 
C) marginal external cost will equal the marginal private cost. 
D) marginal external cost will be greater than the marginal private cost. 
E) marginal social cost will equal the marginal external cost.

Quizplus · Accepted Answer

The marginal external cost is the difference between the marginal social cost and the marginal private cost. Since the marginal social cost is higher than the marginal private cost at 5 concerts, the marginal external cost (the difference) is positive and greater than zero, indicating it is greater than the marginal private cost.

-The Figure Above Illustrates the Marginal Private Cost and the Marginal