Question

If there is a negative externality but no positive externality, then the ___________ output is ____________ than the ____________ output.

a.socially optimal, greater, market

b.market, greater, socially optimal

c.market, less, socially optimal

d.socially optimal, less, market

e.b and d

If there is a positive externality but no negative externality, then the __________ curve _________ the ___________ curve.

a.demand, is the same as, MSB (marginal social benefit)

b.demand, lies above, MSB

c.demand, lies below, MSB

d.supply, lies below, MSC (marginal social cost)

e.supply, lies above, MSC curve

Answer 1

When social costs are above the private costs externalities are negative. when the social costs outweigh the private costs. Some externalities are positive. When a positive gains occure on both private and social level positive externalities occure.

If there is a negative externality but no positive externality, then the market output is less than the socially optimal output.

If there is a positive externality but no negative externality, then the supply curve lies above the msc curve.