If the social cost is greater than the private cost in a particular market,the private equilibrium will be at a quantity:
A) equal to the socially optimal level.
B) less than the socially optimal level.
C) greater 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 social costs exceed private costs, it indicates a negative externality. This leads to overproduction in the market, resulting in a quantity greater than the socially optimal level.

If the Social Cost Is Greater Than the Private Cost