When the marginal private cost of an activity does not equal the marginal social cost,which of the following exists?
A)Positive externality
B)Negative externality
C)Externality in consumption
D)Externality in production
E)External cost

Question

Quizplus · Accepted Answer

When the marginal private cost of an activity does not equal the marginal social cost, an externality exists. If the marginal social cost of production exceeds the marginal private cost of production, then it is an example of an externality in production, which is represented by option D.

When the Marginal Private Cost of an Activity Does Not