If the marginal external cost of building a children's playground equals zero,then the
i.marginal private cost equals the marginal social cost.
ii.marginal social cost equals zero.
iii.marginal private cost equals zero.
A) i only
B) ii only
C) iii only
D) ii and iii
E) i and ii

Question

Quizplus · Accepted Answer

If the marginal external cost of building a children's playground equals zero, it means that there are no externalities associated with building the playground. Therefore, the marginal private cost (costs borne by the firm) will be equal to the marginal social cost (costs borne by society as a whole). This is because there are no additional costs that are borne by society due to the production of the playground, and hence, the optimum quantity produced would be where marginal cost equals marginal benefit.

If the Marginal External Cost of Building a Children's Playground