In the case of a negative externality, the entire marginal social cost curve lies
A)below the entire marginal private cost curve by the amount of the external costs associated with the negative externality.
B)below the entire demand curve by the amount of the external costs associated with the negative externality.
C)above the entire marginal private cost curve by the amount of the external costs associated with the negative externality.
D)above the entire demand curve by the amount of the external costs associated with the negative externality.
E)none of the above

Question

Quizplus · Accepted Answer

In the case of a negative externality, the marginal social cost (MSC) includes both the marginal private cost (MPC) and the external costs. Therefore, the MSC curve lies above the MPC curve by the amount of the external costs.

In the Case of a Negative Externality, the Entire Marginal