Which of the following statements are true regarding externalities? (Check all that apply.)
A. In the case of an externality, the free market will maximize social surplus.
B. A negative externality occurs when an economic activity has a spillover cost to a bystander.
C. Deadweight loss can be either a foregone benefit or the total cost of the externality to society.
D. For computing efficient outcomes, economic agents adjust the demand curve to account for negative externalities.
In the case of the negative externality, the socially efficient output will be relative to the market quantity.
Which of the following is the correct definition of marginal social cost? (Check all that apply.)
A. marginal cost of the externality + marginal external cost.
B. marginal private cost + marginal cost of externality.
C. marginal private cost + marginal external cost.
D. marginal cost + marginal benefit.