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Subject - Economics:

Microeconomics

MCQ - 145-4155

Question:

If a market for a good is producing a negative externality,

  1. at the market output the marginal costs to society exceed the private marginal costs of production.
  2. at the market output the marginal benefits to society exceed the private marginal costs of production.
  3. at the market output the marginal costs to society exceed the total benefits to society.
  4. at the market output the marginal benefits to society exceed the private marginal costs of production.
  5. at the market output the marginal benefits to society exceed the marginal costs to society.

Correct Answer: A

Explanation:

With no externality, MSB = MSC. With a negative externality, MSC > MPC = MSB for the good.

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269 MCQ for effective preparation of the test of Microeconomics of Economics section.

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