If the production of a good generates a detrimental externality, then at that level of production of the good under perfect competition,

Question

Quizplus · Accepted Answer

In the presence of a detrimental externality, the marginal private cost (MPC) is less than the marginal social cost (MSC), not greater. Therefore, the correct choice is C, as it implies that the market price (P) reflects the marginal private cost (MPC) under perfect competition.

If the Production of a Good Generates a Detrimental Externality