If the social cost is greater than the private cost in a particular market,the private equilibrium will be at a quantity:
A)greater than the socially optimal level.
B)equal to the socially optimal level.
C)less than the socially optimal level.
D)greater than or less than the socially optimum level,depending on the size of the external costs.

Question

Quizplus · Accepted Answer

When the social cost is greater than the private cost, it means that there are external costs or negative externalities that are not accounted for in the private market. The private equilibrium only takes into consideration the private costs and ignores the external costs. Therefore, the private equilibrium will result in a quantity that is lower than the socially optimal level, leading to an inefficient outcome. The socially optimal level is the point where the marginal social benefit is equal to the marginal social cost, and it takes into account the external costs. Hence, the private equilibrium will be at a quantity greater than the socially optimal level.

If the Social Cost Is Greater Than the Private Cost