The production of steel creates negative externailities. Society would be better off if steel production occurred at the point where:
A) PMB SMC.
B) SMB = PMC.
C) PMB = SMC.
D) SMB SMC.

Question

The production of steel creates negative externailities. Society would be better off if steel production occurred at the point where:
A) PMB > SMC.
B) SMB = PMC.
C) PMB = SMC.
D) SMB > SMC.

Quizplus · Accepted Answer

When PMB (Private Marginal Benefit) equals SMC (Social Marginal Cost), it indicates that the production level accounts for the external costs imposed on society, leading to an efficient allocation of resources.

The Production of Steel Creates Negative Externailities