If external diseconomies exist in an industry,the

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If external diseconomies exist in an industry, it means that the cost of production for firms in the industry increases as the total output of the industry increases. The social cost of production, therefore, is higher than the private cost of production. This means that the socially optimal output level is below the equilibrium output level, which is determined by the intersection of the market demand curve and the private marginal cost curve. To achieve the socially optimal output level, either the market price should be increased to reflect the social cost, or the industry should be regulated to reduce the output to the socially optimal level.

If External Diseconomies Exist in an Industry,the