When marginal private cost is less than marginal social cost,
A)a public good exists.
B)a negative externality exists.
C)a positive externality exists.
D)negative economic profits are made.

Question

Quizplus · Accepted Answer

When marginal private cost is less than marginal social cost, it means that there is a divergence between the private cost borne by individuals and the social cost borne by society as a whole. This is known as a negative externality, where the actions of individuals have a harmful impact on others and are not fully reflected in the market price. Therefore, the best choice is B - a negative externality exists.

When Marginal Private Cost Is Less Than Marginal Social Cost