One consequence of a negative externality is that: b. the market output is less than the socially optimal output.
In Economics, there are two main types of externality and these include the following:
A positive externality can be defined as a type of externality which arises when the production or consumption of a finished product or service has a significant impact and benefits to a third party that isn't directly involved in the transaction.
A negative externality can be defined as a type of externality which arises when the production or consumption of a finished product or service has negative impact (cost) on a third party.
In this context, we can infer and logically deduce that a consequence of a negative externality is that the market output becomes less than the socially optimal output.
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Complete Question:
One consequence of a negative externality is that:
a. the marginal private cost curve slopes upward.
b. the market output is less than the socially optimal output.
C. social costs are greater than private costs.
d. private costs are greater than social costs.
