Suppose That a Firm Produces Electricity by Burning Coal

Multiple Choice

Suppose that a firm produces electricity by burning coal. The production process creates a negative externality of air pollution. If the firm does not internalize the cost of the externality, it will produce where

A) the value of electricity to consumers equals the private cost of producing electricity.
B) the value of electricity to consumers equals the social cost of producing electricity.
C) the cost of the externality is maximized.
D) the transaction costs of private bargaining are minimized.