Question

When a negative externality exists, external costs are necessarily greater than private costs.

a.social costs equal private costs.
b.social costs are less than private costs.
c.social costs are greater than private costs.
d.none of the above

Answer 1

Social costs are greater than private costs.

Option C

Explanation:

A negative externality happens if an individual or a company decides not to pay the full cost of the action. If a product has a negative externality, it costs society more than the customer spends.

If people have a share of the costs associated with the production of goods, negative externalities exist and have no influence over the associated production decisions.

For example, because of expanded manufacturing practices in its vicinity, parents will have to pay higher healthcare costs associated with pollution-led asthma in their kids.