________ cause private and social marginal cost curves to diverge while ________ cause private demand and social marginal WTP to diverge.

Question

Quizplus · Accepted Answer

External costs refer to costs that are not accounted for by the private market, leading to a divergence between private and social marginal cost curves. On the other hand, external benefits refer to benefits not accounted for by the private market, leading to a divergence between private demand and social marginal WTP. Therefore, external costs cause private and social marginal cost curves to diverge while external benefits cause private demand and social marginal WTP to diverge.

________ Cause Private and Social Marginal Cost Curves to Diverge