When a negative externality is present in a market,total surplus is:
A) higher when buyers only consider private costs.
B) lower when buyers only consider private costs.
C) lower when buyers consider social costs.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

When a negative externality is present, the social cost is higher than the private cost. If buyers only consider private costs, they ignore the external costs, leading to overconsumption and a reduction in total surplus.

When a Negative Externality Is Present in a Market,total Surplus