The marginal external cost of a good or activity equals the amount:
A)by which the marginal social benefit curve is higher than the demand curve.
B)by which the marginal social cost curve is lower than the supply curve.
C)by which the marginal social cost curve is higher than the supply curve.
D)at which the marginal social benefit curve intersects the demand curve.

Question

Quizplus · Accepted Answer

The marginal external cost of a good or activity is the additional cost imposed on society as a whole due to an individual's consumption or production of the good beyond the private cost incurred by the individual. This can be represented by the vertical distance between the marginal social cost curve (which includes both private and external costs) and the supply curve (which represents only private costs). Therefore, the answer is (C) by which the marginal social cost curve is higher than the supply curve.

The Marginal External Cost of a Good or Activity Equals