A negative externality or external cost occurs when:
A)firms fail to achieve allocative efficiency.
B)firms fail to achieve productive efficiency.
C)price exceeds marginal cost.
D)the total cost of producing a good exceeds the costs borne by the producer.

Question

Quizplus · Accepted Answer

A negative externality occurs when the production or consumption of a good imposes costs on third parties that are not reflected in the costs borne by the producer, leading to a situation where the total cost exceeds the private cost.

A Negative Externality or External Cost Occurs When