If negative externalities exist, then in a market with no property rights, A) MSC = MSB. B) MSC MSB. D) MSC = marginal external cost. E) MC MSC.

Name: If negative externalities exist, then in a market with no property rights, A) MSC = MSB. B) MSC MSB. D) MSC = marginal external cost. E) MC > MSC.
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Question

If negative externalities exist, then in a market with no property rights,
A) MSC = MSB.
B) MSC < MSB.
C) MSC > MSB.
D) MSC = marginal external cost.
E) MC > MSC.

Quizplus · Accepted Answer

Negative externalities cause the marginal social cost (MSC) to be greater than the marginal social benefit (MSB) because the external costs are not accounted for in the market transactions.

If Negative Externalities Exist, Then in a Market with No