If production of a good generates an environmental negative externality, the effect of that externality is captured by the MEC of production.

Question

Quizplus · Accepted Answer

The MEC (Marginal External Cost) of production includes the negative external costs associated with the production of a good, including environmental impacts. As such, the effect of an environmental negative externality is included in the MEC of production.

If Production of a Good Generates an Environmental Negative Externality