In the presence of external costs, the social cost curve lies ______ the supply curve.
A) above
B) below
C) with
D) sometimes above and sometimes below

Question

Quizplus · Accepted Answer

External costs are costs imposed on society as a whole and not accounted for by the producer. Therefore, the social cost curve takes into account both the private costs and the external costs, which will be higher than the supply curve. This means that the social cost curve lies above the supply curve.

In the Presence of External Costs, the Social Cost Curve