A consequence of a negative externality is that social costs __________ private costs,and the efficient level of output __________.

Question

Quizplus · Accepted Answer

A negative externality imposes costs on society beyond the costs borne by the producer or consumer. Therefore, social costs are greater than private costs. To align private costs with social costs and ensure an efficient outcome, the government must impose a tax on the producer or consumer responsible for the negative externality. This tax will discourage the production or consumption of the good at levels where social costs exceed private costs.

A Consequence of a Negative Externality Is That Social Costs