When MSC MPC, there are detrimental externalities.

Question

When MSC > MPC, there are detrimental externalities.

Quizplus · Accepted Answer

MSC (Marginal Social Cost) represents the total cost imposed on society including private cost and external cost. MPC (Marginal Private Cost) represents only the cost borne by the producer. When MSC is greater than MPC, it indicates that the private cost borne by the producer is less than the total cost to society. This difference implies the existence of negative externalities, which are detrimental to society.

When MSC > MPC, There Are Detrimental Externalities