-The above figure shows the market for steel ingots.An externality can be seen because
A) the social marginal cost exceeds the private marginal cost.
B) the private marginal cost exceeds the social marginal cost.
C) the optimal quantity of steel is zero.
D) not enough steel gets produced by the competitive market.

Question

-The above figure shows the market for steel ingots.An externality can be seen because
A) the social marginal cost exceeds the private marginal cost. 
B) the private marginal cost exceeds the social marginal cost. 
C) the optimal quantity of steel is zero. 
D) not enough steel gets produced by the competitive market.

Quizplus · Accepted Answer

An externality, particularly a negative externality, is present when the social marginal cost (SMC) of producing a good exceeds the private marginal cost (PMC) of producing that good. This indicates that there are additional costs to society not accounted for by the producers, such as environmental pollution or health impacts from steel production.

-The Above Figure Shows the Market for Steel Ingots