Thursday, November 19, 2009

If social costs are greater than social benefits, does it mean that a negative externality occurs?

People say that if social costs are greater than private costs, a negative externality occurs. But what if social costs are greater than social benefits, what occurs?

If social costs are greater than social benefits, does it mean that a negative externality occurs?
According to cost benefit analysis, the action will not be taken. If a certain action will impose a higher social cost than it derives a social benefit, then it would be foolish to implement such a course of action. Thus, the action simply will not be taken.
Reply:Without a doubt,If social cost are greater than social benefits its is negative externality.Take a good consideration an Industry built near people residence and it omits smoke and make noise pollution,and since it has been established it has done nothing for the people,That's is to say social cost is great than social benefits.


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