When private costs differ from social costs, which of the following must be present?
A)excludable resources
B)a negative externality
C)a natural monopoly
D)poor profit incentive to capitalise on the resource

Question

Quizplus · Accepted Answer

When private costs differ from social costs, there is a negative externality present. This means that the production or consumption of a good or service has a negative impact on a third party, who is not involved in the transaction. Therefore, the social cost, which includes the cost to the third party, is higher than the private cost, which only includes the cost to the producer or consumer. This can lead to overproduction or overconsumption of the good or service, as the private cost is lower than the social cost.

When Private Costs Differ from Social Costs, Which of the Following