If society is experiencing a net social cost from the production of a good, this implies that
A)the socially optimal level of output is being produced and society is willing to accept the costs that result.
B)producers would rather produce the output at which marginal social cost equals the demand for the good.
C)negative externalities are involved in the production of this good.
D)positive externalities must be involved in the production of this good.

Question

Quizplus · Accepted Answer

A net social cost implies that there are negative externalities involved in the production of the good, which means that the social cost is greater than the private cost incurred by the producer. Therefore, the socially optimal level of output is not being produced and there is a need to reduce production to a level where the marginal social cost equals the marginal social benefit.

If Society Is Experiencing a Net Social Cost from the Production