Question 1
If there are external costs of production not accounted for, then marginal
◦ cost equals marginal social cost.
◦ cost is less than marginal social cost.
◦ cost is greater than marginal social cost.
◦ social cost is zero.
Question 2
If there are external costs in production and firms do not have to account for these costs, then firms will produce
◦ at the efficient level.
◦ an output level that is below the efficient level.
◦ an output level that is above the efficient level.
◦ an output level that is either above or below the efficient level.