If the social costs of an economic activity are $200 and the private costs are $200,then the external costs of the activity are ________,and market failure ________.

Question

Quizplus · Accepted Answer

External costs are the difference between social costs and private costs. If both are $200, the external costs are $0. Market failure occurs when the allocation of goods and services is not efficient, often due to externalities not being accounted for. However, in this case, since the social costs equal the private costs, it implies that all costs are internalized, and thus, market failure does not occur.

If the Social Costs of an Economic Activity Are $200