If the true social marginal cost of producing a product,including the externality,is higher than the marginal cost to the producer alone,then which of the following must be true?

Question

Quizplus · Accepted Answer

When the true social marginal cost of producing a product, including the externality, is higher than the marginal cost to the producer alone, it indicates that there are additional costs to society not borne by the producer. This scenario typically occurs when the production of the product generates a negative externality, such as pollution, where the societal costs (health issues, environmental degradation) are not reflected in the producer's costs. Positive externalities would have the opposite effect, implying benefits to society not captured by the producer's costs.

If the True Social Marginal Cost of Producing a Product,including