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Course: AP®︎/College Microeconomics > Unit 6

Lesson 2: Externalities

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Externalities: Foundational concepts

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The consumption of good Z creates positive externalities, but there are no externalities in producing good Z.

What must be true at the market equilibrium for good Z if the market is not regulated?

(Choice A)
Marginal private benefit is greater than marginal social benefit
(Choice B)
Marginal social cost is greater than marginal private benefit
(Choice C)
Marginal social cost is greater than marginal private cost
(Choice D)
Marginal social benefit is greater than marginal social cost
(Choice E)
Marginal social benefit equals marginal social cost