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natta225 [31]
3 years ago
9

Suppose electricity generates a negative externality in production. If​ so, then ____

Business
1 answer:
garik1379 [7]3 years ago
3 0

Answer:

The correct answer is option A.

Explanation:

A negative externality refers to the situation when the cost of production is borne by a third party which is not involved in the production process.

In case there is a negative externality present, the marginal social cost will be greater than the marginal private cost. The competitive price will be lower than the socially optimal price.

Since a third party partially bears the cost, the producer will be able to produce more than the optimal level. There will be a deadweight loss of social welfare.

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