When a Negative Externality Is Present, the Socially Optimal Level

question 47

True/False

When a negative externality is present, the socially optimal level is less than the private market equilibrium.

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Definitions:

Monopolist

A market participant that is the sole provider of a good or service, giving them significant control over pricing and market conditions.

Variable Costs

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

Marginal Costs

The additonal cost incurred by producing one more unit of a product or service.

Elasticity of Demand

The elasticity of demand measures how responsive the quantity demanded of a good or service is to a change in its price, indicating the sensitivity of consumers to price changes.