If either the production or consumption of a good generates an external cost, then the market equilibrium quantity will be:
A)socially optimal.
B)less than the socially optimal quantity.
C)greater than the socially optimal quantity.
D)equal to zero.

Question

Quizplus · Accepted Answer

If a good generates an external cost, then marginal cost to society of another unit of the good is greater than the private cost of another unit, implying that the market equilibrium quantity will be greater than the socially optimal quantity.

If Either the Production or Consumption of a Good Generates