A negative externality exists if
A)there are price controls in a market.
B)there are quantity controls in a market.
C)the marginal social cost of producing a good or service exceeds the private cost.
D)the marginal private cost of producing a good or service exceeds the social cost.

Question

Quizplus · Accepted Answer

A negative externality exists when the cost to society of producing a good or service exceeds the cost to the individual producer. In other words, there is a difference between the private cost and social cost of production. This can result in overproduction of the good or service, as the producer is not taking into account the negative effects on society when making production decisions. Price and quantity controls do not necessarily relate to externalities.

A Negative Externality Exists If