If a product has zero external costs,then
A) marginal social cost equals marginal private cost.
B) marginal social cost is greater than marginal private cost.
C) marginal social cost is less than marginal private cost.
D) marginal social cost equals zero.
E) We need more information to determine the relationship between marginal private cost and marginal social cost.

Question

Quizplus · Accepted Answer

When a product has zero external costs, it means that all costs associated with producing and consuming the product are borne by the producer and the consumer themselves. This implies that the marginal social cost (MSC) is equal to the marginal private cost (MPC), as there are no additional costs that are externalized to third parties.

If a Product Has Zero External Costs,then