If the social cost of producing a good or service exceeds the private cost
A)a positive externality exists.
B)the sum of consumer surplus and producer surplus is maximized.
C)the market achieves economic efficiency.
D)a negative externality exists.

Question

Quizplus · Accepted Answer

The situation described indicates a negative externality, where the production of the good or service imposes costs on society that are not fully accounted for by the private costs incurred by the producer. In this case, market outcomes are unlikely to achieve economic efficiency, as the true social cost of production is not reflected in prices, leading to an overproduction of the good or service.

If the Social Cost of Producing a Good or Service