Asked by Dhabole Sharavanin on Jun 11, 2024
Verified
An external cost is
A) MSC + MC.
B) MSC ‐ MC.
C) MSC/ MC.
D) MSC × MC.
External Cost
External cost is a cost incurred by a third party who did not agree to the action that caused the cost, often seen in pollution or other forms of environmental impact.
MC
An abbreviation commonly used for "Marginal Cost," which refers to the additional cost incurred by producing one more unit of a good or service.
- Understand the concept of externalities and their impact on public welfare.
Verified Answer
DM
Danielle MeerbeekJun 17, 2024
Final Answer :
B
Explanation :
An external cost is the cost that is not borne by the parties directly involved in a transaction. It is the difference between the marginal social cost (MSC) and the marginal private cost (MC), hence MSC - MC.
Learning Objectives
- Understand the concept of externalities and their impact on public welfare.