In the presence of a negative production externality, _____.
A)the private cost of a good exceeds the private marginal benefit from the good
B)the private benefit from a good exceeds the private marginal cost of the good
C)the social cost exceeds the private cost of a good
D)the social marginal cost is less than the private marginal cost of a good
E)the private cost of a good is less than the private marginal benefit from the good

Question

Quizplus · Accepted Answer

In the presence of a negative production externality, the social cost exceeds the private cost of the good, as the cost imposed on society due to the negative external effects of production is not reflected in the private cost incurred by the producer. This leads to market inefficiencies and a suboptimal level of production and consumption of the good.

In the Presence of a Negative Production Externality, _____