When production of a good results in an external cost,the unregulated competitive market equilibrium is inefficient because ________. A) MSC = MC B) MSC = MB C) MSC MB D) MSC

Question

When production of a good results in an external cost,the unregulated competitive market equilibrium is inefficient because ________.
A) MSC = MC
B) MSC = MB
C) MSC > MB
D) MSC < MB
E) MSC is undefined

Quizplus · Accepted Answer

When production of a good results in an external cost, the Marginal Social Cost (MSC) is higher than the Marginal Benefit (MB), indicating that the cost to society of producing one more unit is greater than the benefit derived from that unit. This discrepancy leads to overproduction and inefficiency in the market.

When Production of a Good Results in an External Cost,the