Suppose the production of a good results in negative externalities. If all costs are taken into account, then
A)output will be at a lower level than if all costs are not taken into account.
B)output will be at a lower level than the socially optimal level.
C)the marginal private cost curve will lie above and to the left of the marginal social cost curve.
D)output will be at a higher level than if all costs are not taken into account.

Question

Quizplus · Accepted Answer

When all costs, including negative externalities, are considered, the output level decreases to account for the true social cost, leading to a lower output level compared to when these costs are ignored.

Suppose the Production of a Good Results in Negative Externalities