Question

Sela= 47387_1&content id=574743 1&step. Question Completion Status: QUESTION 5 1 points Save Figure: Dishwashing Detergent Price SC $18 3 Reference: Ref 10-7 6 9 12 15 18 Quantity (Figure: Dishwashing Detergent) Refer to the figure. Dishwashing detergent contains phosphates that harm marine life. In this figure, SC represents the A. private cost of production. B. social cost of production: the private cost plus the external cost. C. private cost of production plus the social cost of production D. social cost of production: the external cost less the private cost. Save All Answers Save a Click Save and Submit to save and submit. Click Save All Answers to save all answers.

Answer 1

SC is social cost which is defined as external cost + Private cost

When negative externality (benefit one party and harm others) are present in market, social cost supply curve always lies above the private cost supply curve. Private players produce 9 units while they do not pay for the harm they produce to the society which is included in social cost. Here optimum level of production is 6 units where SC equals D.