One Consequence of a Negative Externality Is That

question 45

Multiple Choice

One consequence of a negative externality is that

• A)social costs are greater than private costs.
• B)private costs are greater than social costs.
• C)the marginal private cost curve slopes upward.
• D)the market output is less than the socially optimal output.
• E)a and c

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Definitions:

Variable Cost

Costs that vary directly with the level of production or output.

Fixed Cost

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the activity or production level of a business.