If a perfectly competitive industry is not forced to take account of a negative externality it creates, it will produce where
A) the marginal cost of production equals the marginal private benefit.
B) the marginal cost of production equals the marginal social benefit.
C) the marginal social cost of production equals the marginal social benefit.
D) price equals marginal social benefit.

Question

Quizplus · Accepted Answer

In a perfectly competitive market without accounting for negative externalities, firms produce where marginal cost equals marginal private benefit, ignoring the external costs imposed on society.

If a Perfectly Competitive Industry Is Not Forced to Take