FIGURE 16- 1
-Refer to Figure 16- 1.Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC1 and MB0,respectively,then there exists

Question

FIGURE 16- 1 
-Refer to Figure 16- 1.Suppose that the perfectly competitive market with no government intervention achieves equilibrium at point A.If the social marginal costs and social marginal benefits are represented by MC1 and MB0,respectively,then there exists

Quizplus · Accepted Answer

If the social marginal costs (MC1) are higher than the private marginal costs, it indicates a negative external cost, meaning that the production or consumption of the good imposes additional costs on society not reflected in the market price.