The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good. FIGURE 17- 1
-Refer to Figure 17- 1.A negative externality is depicted because the

Question

The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MCP,and the marginal cost to society,MCS,at each level of output of some good.  FIGURE 17- 1
-Refer to Figure 17- 1.A negative externality is depicted because the

Quizplus · Accepted Answer

The marginal social cost (MCS) is higher than the marginal private cost (MCP) at each level of output. This indicates that there is a negative externality present, as the production of the good is imposing costs on society beyond what the private firms are experiencing. Therefore, the optimal level of output would be lower than the level at which MCP intersects with MB, as the additional costs to society are not being reflected in the private market.

The Figure Below Shows the Marginal Benefit to Consumers,MB,the Marginal