The private costs of a good that create a negative externality are equal to the social costs plus the externality.

Question

Quizplus · Accepted Answer

The private costs of a good only include the costs that the producer and consumer directly incur, while the social costs also include the negative impact on third parties or the environment. Therefore, the social costs plus the negative externality equals the total cost to society, which is greater than the private costs.

The Private Costs of a Good That Create a Negative