When the Market for Product X Includes a Negative Externality

question 18

Multiple Choice

When the market for product X includes a negative externality,:

• A)marginal social cost exceeds marginal private cost.
• B)marginal private cost exceeds marginal social cost.
• C)marginal social benefit exceeds marginal private benefit.
• D)marginal private benefit exceeds marginal social benefit.

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Definitions:

ATC

Average total cost (ATC) is the total cost of production divided by the quantity of output produced, representing the cost per unit of output.

Marginal Cost

The supplementary expense involved in creating an additional unit of a product or service.

Marginal Revenue

The extra revenue a company earns by selling an additional unit of a product or service.

Competitive Market

A market structure characterized by many buyers and sellers where no single entity can dictate or significantly alter the market price.