If a negative externality is associated with the production of some good, then

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A negative externality means that the marginal social cost (MSC) is greater than the marginal private cost (MPC), and therefore MSC - MPC is positive. The optimal level of production occurs where marginal social cost equals marginal social benefit, but because of the externality, too much of the good is being produced by the firm at the expense of society. This is why government intervention or a Pigouvian tax may be necessary to internalize the externality and bring the market outcome closer to the socially optimal level.

If a Negative Externality Is Associated with the Production of Some