Use the following figure. MB and MC represent private, or individual, marginal benefits and costs. MBS represents marginal benefits to society when positive externalities are present, and MCS represents marginal costs to society when negative externalities are present.

-If, as a result of an individual's action, society's net benefit is maximized at activity level 1, we can conclude that the action creates:
A) no negative or positive externalities.
B) negative, but not positive, externalities.
C) positive, but not negative, externalities.
D) both negative and positive externalities.

Question

Use the following figure. MB and MC represent private, or individual, marginal benefits and costs. MBS represents marginal benefits to society when positive externalities are present, and MCS represents marginal costs to society when negative externalities are present.
 
-If, as a result of an individual's action, society's net benefit is maximized at activity level 1, we can conclude that the action creates:
A) no negative or positive externalities. 
B) negative, but not positive, externalities. 
C) positive, but not negative, externalities. 
D) both negative and positive externalities.

Quizplus · Accepted Answer

The Answer of Use the following figure. MB and MC represent private, or individual, marginal benefits and costs. MBS represents marginal benefits to society when positive externalities are present, and MCS represents marginal costs to society when negative externalities are present.
 
-If, as a result of an individual's action, society's net benefit is maximized at activity level 1, we can conclude that the action creates:
A) no negative or positive externalities. 
B) negative, but not positive, externalities. 
C) positive, but not negative, externalities. 
D) both negative and positive externalities.

Use the Following Figure