When the marginal social cost of the production of Good A is greater than the marginal private cost of the production of Good A, then
A) a competitive, unregulated market produces less than the efficient quantity of Good A.
B) a competitive, unregulated market produces the efficient quantity of Good A.
C) a competitive, unregulated market produces more than the efficient quantity of Good A.
D) the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.

Question

Quizplus · Accepted Answer

When the marginal social cost is greater than the marginal private cost, it indicates a negative externality. In a competitive, unregulated market, this leads to overproduction, as the market does not account for the external costs.

When the Marginal Social Cost of the Production of Good