The cost of producing an additional unit of a good or service that falls on people other than the producer is the marginal
A) external cost.
B) private cost.
C) social cost.
D) social benefit.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The definition provided in the question corresponds to the concept of external cost, which is also called a negative externality. It occurs when the production or consumption of a good or service imposes costs on third parties who are not involved in the transaction. The producer does not take the external cost into account when making production decisions, and therefore, the market outcome is inefficient.

The Cost of Producing an Additional Unit of a Good