If the marginal external cost of building a children's playground equals zero, then the i. marginal private cost equals the marginal social cost.
Ii. marginal social cost equals zero.
Iii. marginal private cost equals zero.

Question

Quizplus · Accepted Answer

When the marginal external cost is zero, it means that there are no negative externalities associated with building a children's playground. Therefore, the marginal private cost of building the playground is equal to the marginal social cost. Option ii is incorrect because the marginal social cost cannot be zero if there are any private costs associated with building the playground. Option iii is also incorrect because the marginal private cost cannot be zero when building a playground involves any costs, even if there are no negative externalities.

If the Marginal External Cost of Building a Children's Playground