Suppose That a Negative Externality Is Created by the Production

question 350

Multiple Choice

Suppose that a negative externality is created by the production of good X. Which of the following statements is correct?

• A)The social cost of producing good X includes the private cost plus the cost to bystanders of the externality.
• B)The increased social cost can be graphed as a decrease in demand.
• C)The market equilibrium quantity will be the socially optimal quantity as long as the government does not interfere.
• D)Both a and b are correct.

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