BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

If the production of a good yields a negative externality, then the social-cost curve lies ________ the supply curve, and the socially optimal quantity is ________ than the equilibrium quantity.

a. above, greater

b. above, less

c. below, greater

d. below, less

To determine
Negative externality and social cost curve.

Explanation

Option (b):

If the production of a good yields a negative externality, then the social cost curve lies above the supply curve, and the socially optimal quantity is less than the equilibrium quantity. Negative externality always creates social cost. So, it lies above the supply curve of the production of that good. But a positive externality creates social benefit to the society. Thus, option “b” is correct.

Option (a):

If the production of a good yields a negative externality, then the social cost curve lies above the supply curve, and the socially optimal quantity will be less than the equilibrium quantity; not greater than the equilibrium quantity...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

How does a cost-efficient capital market help reduce the prices of goods and services?

Fundamentals of Financial Management (MindTap Course List)

Describe the different ways in which capital can be transferred from suppliers of capital to those who are dema...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)