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A-Level Economics · Negative production externality diagram question

Which point is the SOCIAL optimum, where society would like this market to be?

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The diagram

The answer

Point F. Where the FULL cost (MSC) meets benefit: point F, quantity 3. Some pollution is worth tolerating — but not this much. Society counts ALL costs: MSC crosses D at point F, quantity 3. Note it is NOT zero — the first units are worth their full social cost.

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This is one of 5 questions on the negative production externality diagram — every corner lettered, every wrong answer diagnosed.

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