If a good has zero external costs, then
A) marginal social cost is less than marginal private cost.
B) marginal social cost equals marginal private cost.
C) marginal social cost is greater than marginal private cost.
D) We need more information to determine the relationship between private and social costs.

Question

Quizplus · Accepted Answer

Marginal social cost equals marginal private cost when there are zero external costs, as external costs are those costs borne by a third party not involved in the decision to produce or consume a good. Without external costs, the social cost (the total cost to society) is the same as the private cost (the cost to the producer or consumer).

If a Good Has Zero External Costs, Then