An negative externality may arise when:

Select one:

a.a produce ignores external costs when making production decisions

b.social surplus is maximized

c.someone does something socially undesirable

d.a producer fully internalizes impacts on third parties

Suppose there is a market characterized by the following demand and supply curves: MB = P = 22 - 1/30 MC = P = Q/2 + 2 Suppose there is a negative externality of $5 per unit in this market that is not corrected for by the market. What is the efficient amount of production/consumption? (Hint: Efficient level of production/consumption is where SMC=SMB) Answer: 0.0167