When Marginal Private Cost Is Equal to Marginal Social Cost

question 132

Multiple Choice

When marginal private cost is equal to marginal social cost,

• A)the activity in question generates no positive externality.
• B)the activity in question generates no negative externality or those externalities have been internalized.
• C)all positive externalities have been internalized.
• D)no negative externalities have been internalized.

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Definitions:

Market System

An economic system where decisions regarding investment, production, and distribution are guided by the forces of supply and demand and prices mediate transactions.

Production Decisions

The process of determining what goods or services to produce, how much, and by what method.

Sovereign Government

A type of government that operates independently without interference from foreign powers, possessing ultimate authority over a geographical area.