External costs are
A) negative externalities and are subtracted from marginal private costs to find marginal social costs.
B) negative externalities and are added to marginal private costs to find marginal social costs.
C) positive externalities and are added to marginal private costs to find marginal social costs.
D) positive externalities and are subtracted from marginal private costs to find marginal social costs.

Question

Quizplus · Accepted Answer

External costs refer to the costs imposed on society as a whole, as a result of the production or consumption of a particular good or service. These costs are also known as negative externalities and are not taken into account by the producers or consumers who create them. To determine the true cost of production, external costs must be added to the marginal private costs of production to obtain the marginal social costs. Therefore, B is the correct choice as it states that external costs are added to marginal private costs to find marginal social costs.

External Costs Are