A marginal external cost of a product is equal to
A) what the producer has to pay to hire resources to produce another unit.
B) the cost someone other than the producer incurs when another unit is produced.
C) the cost the producer incurs to produce another unit.
D) what the consumer must pay when he or she buys the good or service.
E) None of these answers describes a marginal external cost.

Question

Quizplus · Accepted Answer

A marginal external cost refers to the additional cost imposed on someone other than the producer when another unit of the product is produced. Choice A describes a marginal private cost, choice C describes a fixed cost or variable cost of production, and choice D describes a price paid by the consumer. Choice E is incorrect as choice B describes the definition of a marginal external cost.

A Marginal External Cost of a Product Is Equal to