If a good has an external cost, the
A) competitive market outcome is efficient.
B) marginal private cost reflects the external cost.
C) competitive market outcome is inefficient.
D) marginal private benefit is equal to the marginal social cost.

Question

Quizplus · Accepted Answer

When a good has an external cost, the competitive market outcome is inefficient because the market fails to account for the external cost, leading to overproduction and a misallocation of resources.

If a Good Has an External Cost, the