When marginal private cost is equal to marginal social cost,

Question

Quizplus · Accepted Answer

When marginal private cost equals marginal social cost, it means that all external costs (or negative externalities) have been accounted for or internalized by the private entity undertaking the activity. This situation does not necessarily speak to the presence or absence of positive externalities, but rather to the alignment of private and social costs, indicating that negative externalities have been internalized.

When Marginal Private Cost Is Equal to Marginal Social Cost