If There Is a Negative Externality, and the Market Output

question 52

Multiple Choice

If there is a negative externality, and the market output is 100 units more than the socially optimal output, then it follows that

• A)the external costs associated with the negative externality are greater than the marginal private costs.
• B)the external costs associated with the negative externality are less than the marginal private costs.
• C)there is market failure.
• D)any tax imposed on the production of the output will bring about the socially optimal output.

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