Question 1
The total cost to society of producing an additional unit of a good or service is the marginal
◦ external cost.
◦ damage cost.
◦ social cost.
◦ private cost.
Question 2
If a profit-maximizing perfectly competitive firm does not have to compensate society for a negative externality, the firm will choose to produce where
◦ price equals marginal cost.
◦ price equals marginal social cost.
◦ marginal cost equals marginal social cost.
◦ marginal revenue equals marginal social cost.