Which of the following is true of the relationship between marginal social cost (MSC) and marginal private cost (MPC) in the presence of a negative externality?
A) MSC equals the difference between MPC and the marginal external cost.
B) MSC is the product of MPC and the marginal external cost.
C) MSC is the sum of MPC and the marginal external cost.
D) MSC equals the sum of MPC and marginal abatement cost.

Question

Quizplus · Accepted Answer

In the presence of a negative externality, the marginal social cost (MSC) is the sum of the marginal private cost (MPC) and the marginal external cost. This accounts for the total cost to society, including both the private costs incurred by the producer and the external costs borne by others.

Which of the Following Is True of the Relationship Between