The difference between social cost and private cost is a measure of the
A)loss in profit to the seller as the result of a negative externality.
B)cost of an externality.
C)cost reduction when the negative externality is eliminated.
D)cost incurred by the government when it intervenes in the market.

Question

Quizplus · Accepted Answer

Social cost is the total cost to society of producing a good or service, including both the private cost incurred by the producer and any external costs or negative externalities imposed on third parties. Private cost, on the other hand, is the cost incurred by the producer of the good or service. The difference between social cost and private cost, therefore, represents the cost of an externality, which is the cost imposed on third parties as a result of the production or consumption of a good or service.

The Difference Between Social Cost and Private Cost Is a Measure