When the social cost of production is greater than the private cost, we have a
A)positive externality
B)negative externality
C)public good
D)private good
E)positive spillover

Question

Quizplus · Accepted Answer

A negative externality occurs when the social cost of production is greater than the private cost. This means that the production of a good or service has a negative impact on third parties who are not involved in the production or consumption of the good or service. For example, pollution from a factory can harm the health of nearby residents. The factory's private cost of production may not include the cost of this harm, but the social cost does.

When the Social Cost of Production Is Greater Than the Private