When does a negative externality exist?
A) whenever marginal social cost exceed marginal private costs
B) whenever marginal social costs exceed marginal social benefits
C) whenever marginal social benefits exceed marginal private benefits
D) whenever marginal private costs exceed marginal private benefits

Question

Quizplus · Accepted Answer

A negative externality exists when the marginal social cost exceeds the marginal private cost. This means that the cost to society as a whole is greater than the cost to the individual who is causing the negative externality. For example, pollution from a factory imposes costs on society, such as health problems and environmental damage, that are not borne by the factory owner.

When Does a Negative Externality Exist