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

Question

Quizplus · Accepted Answer

In the case of a positive externality, the social marginal cost (SMC) is lower than the private marginal cost (PMC) because positive externalities imply that there are additional benefits to society that are not captured by the private cost. Therefore, the true cost to society, when including these benefits, is less than the cost incurred by the individual or firm producing the good or service.

In the Case of a Positive Externality,social Marginal Cost Will