If firms do NOT account for external costs of production the

If firms do NOT account for external costs of production, then marginal social cost Selected Answer: B, is zero. Answers: A is greater than marginal cost. B. is zero. c. is less than marginal cost. D. equals marginal cost.

Solution

(Image 1) Option (D)

Marginal social cost (MSC) = Marginal cost (MC) + Marginal external cost (MEC)

When firms do not account for external cost, MEC = 0 nd therefore, MSC = MC.

(Image 2) Option (B)

Private goods are both rival and excludable in consumption.

(Image 3) Option (C)

Moral hazard arises when employers pay a low wage, so high-quality workers do not apply for the job and the employer can hire only low quality workers.