A negative externality or spillover cost occurs when:
A) firms fail to achieve allocative efficiency.
B) firms fail to achieve productive efficiency.
C) the price of the good exceeds the marginal cost of producing it.
D) the total cost of producing a good exceeds the costs borne by the producer.

Question

Quizplus · Accepted Answer

Negative externalality or spillover cost occurs when the production or consumption of a good imposes costs on third parties that are not reflected in the market price, meaning the total societal cost is higher than the cost incurred by the producer.

A Negative Externality or Spillover Cost Occurs When