Margarite Opened a Successful Restaurant Two Years Ago on a Block

Multiple Choice

Margarite opened a successful restaurant two years ago on a block of connecting row houses. All of the other businesses on the block are well-established accounting and law offices. Those businesses have complained that the garbage bins in back of the restaurant are attracting mice, rats, and stray cats and dogs and that they are spending more and more on exterminators. In economic terms, what is happening?

A) The other businesses on the block are dealing with a marginal social cost because Margarite considers only her marginal external cost as she makes decisions.
B) The other businesses on the block are dealing with an externality because Margarite considers only her marginal private costs as she makes decisions.
C) Margarite is creating an externality that is imposing marginal private costs on the other businesses on her block.
D) Margarite is creating marginal private costs that are adding internal costs to the other businesses on the block.