If the marginal private cost of producing one kilowatt of power in South Australia is ten cents and the marginal social cost of each kilowatt is fourteen cents, then the marginal external cost equals ________ per kilowatt.
A) ten cents
B) nineteen cents
C) fourteen cents
D) four cents
E) zero cents

Question

Quizplus · Accepted Answer

The marginal external cost is the difference between the marginal social cost and the marginal private cost. So, Marginal External Cost = Marginal Social Cost - Marginal Private Cost = 14 cents - 10 cents = 4 cents. Therefore, choice (D) is the correct answer.

If the Marginal Private Cost of Producing One Kilowatt of Power