The social cost of an externality can be described as:
A)always equal to the tax the government imposes on production of the good
B)the cost imposed on society that is neglected during the production of the good
C)the situation that arises when two parties cannot reach an agreement over the production of a good
D)the value people place on the production of a good

Question

Quizplus · Accepted Answer

The social cost of an externality refers to the cost imposed on society as a result of the production of a good, which is often neglected by the producer of the good. This cost includes both the private costs incurred by the producer and the external costs imposed on third parties, such as pollution or environmental degradation. It is not necessarily equal to the tax imposed by the government on the production of the good, nor is it simply the value that people place on the production of the good. It is also not related to a situation where two parties cannot agree on the production of a good.

The Social Cost of an Externality Can Be Described As