Principles of Microeconomics / Unit 11 MIC 1003 short lesson, about 20 seconds
Marginal Private Cost and Marginal Social Cost
Captions available
The idea
Marginal private cost is what the seller bears for one more unit; marginal social cost adds the external cost. With a negative externality, marginal social cost exceeds marginal private cost, so the market overproduces.
In practice
Market: demand meets private cost. Optimum: demand meets social cost.
Where people slip
Overproduction happens because social cost sits above private cost, not below; that is the exam's question.
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