The figure below shows the marginal benefit to consumers,MB,the marginal cost to private firms,MC P ,and the marginal cost to society,MC S ,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,MC P ,and the marginal cost to society,MC S ,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 (MC_S) is greater than the marginal private cost (MC_P), indicating a negative externality. This means that the private firms' costs do not account for the full costs to society, leading to overproduction. The optimal level of output is where marginal social benefit (MB) equals marginal social cost (MC_S), which is lower than the level of output where marginal private benefit (the same as MB in this case) equals marginal private cost (MC_P). Therefore, the answer is B.

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