Suppose That a Negative Externality Is Created by the Production

Multiple Choice

Suppose that a negative externality is created by the production of good X. Which of the following statements is correct?

A) The social cost of producing good X includes the private cost plus the cost to bystanders of the externality.
B) The increased social cost can be graphed as a decrease in demand.
C) The market equilibrium quantity will be the socially optimal quantity as long as the government does not interfere.
D) Both a and b are correct.