The socially optimal amount of an externality is:

Question

Quizplus · Accepted Answer

The socially optimal amount of an externality takes into account the costs and benefits to society, which can be determined through cost-benefit analysis. It may be different from the amount that market forces would produce, as the market does not take into account the external costs or benefits. Zero (A) may not be the socially optimal amount if there are positive externalities, and one-half (B) is a specific rule of thumb that may not be applicable in all cases.

The Socially Optimal Amount of an Externality Is