When There Is a Negative Externality, the Marginal Private Cost

question 222

Multiple Choice

When there is a negative externality, the marginal private cost of production ________ the marginal social cost of production.

• A)is greater than
• B)is equal to
• C)eliminates
• D)is less than

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Definitions:

Diminishing Returns

The principle stating that if one factor of production is increased while others remain constant, the overall returns will eventually decrease after a certain point.

Negative Returns

A situation in which a business or investment loses more money than it earns or generates in revenue.

Variable Costs

Costs that change in proportion to the level of production or business activity, such as materials and labor.

Shut Down

A shut down refers to a temporary or permanent cessation of operations, typically due to economic conditions or strategic decisions.