If a market solution generates marginal social benefits equal to marginal social costs, then:
A) a positive externality is present.
B) a negative externality is present.
C) no net externality is present.
D) social surplus has been maximized.

Question

Quizplus · Accepted Answer

If the market solution generates marginal social benefits equal to marginal social costs, then no net externality is present. This means that the private benefits and costs are equivalent to the social benefits and costs, and there is no need for government intervention to correct a market failure. Social surplus is also maximized in this situation.

If a Market Solution Generates Marginal Social Benefits Equal to Marginal