Exhibit 30-4

-Refer to Exhibit 30-4. If a negative externality exists, then the socially optimal output is

Question

Exhibit 30-4
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-Refer to Exhibit 30-4. If a negative externality exists, then the socially optimal output is

Quizplus · Accepted Answer

The socially optimal output in the presence of a negative externality is lower than the market equilibrium output because it accounts for the external costs not considered by the market. This output level aims to balance the marginal social cost with the marginal social benefit, leading to a more efficient allocation of resources.

Exhibit 30-4 ​

Exhibit 30-4