If firms pollute when they produce:

Name: If firms pollute when they produce:
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When firms pollute during production, they impose a cost on society that is not reflected in the private cost of production. Therefore, the marginal social cost (MSC) exceeds the marginal private cost (MPC), which is the definition of a negative externality. In this case, the optimal level of production would be where MSC equals marginal social benefit (MSB), not where MPC equals MSB.

If Firms Pollute When They Produce