Scenario 10-1 The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 1,000th gallon of gasoline entails the following: a private cost of $3.10 a social cost of $3.55 a value to consumers of $3.70 Refer to Scenario 10-1. From the given information, it is apparent that

It is apparent that the production of gasoline involves a negative externality which means that the market will produce a larger quantity of gasoline than is socially desirable.

What is a negative externality?

In economics, this refers to a condition that exists when the production or consumption of a product results in a cost to a third party.

Hence, based on the information given on the gasoline price and values, it is deduced that the production of gasoline involves a negative externality which means that the market will produce a larger quantity of gasoline than is socially desirable.

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