In the case of a negative externality,the social marginal cost will
A)exceed the private marginal cost.
B)be equal to private marginal cost.
C)fall short of private marginal cost.
D)bear no significant relation to private marginal cost.

Question

Quizplus · Accepted Answer

Negative externality creates additional costs to the society, hence the social marginal cost will exceed the private marginal cost. This is because private producers do not consider the external costs they impose on others while producing goods, as a result, they will produce more than the socially optimal level, leading to an underallocation of resources.

In the Case of a Negative Externality,the Social Marginal Cost