The difference between social cost and private cost is a measure of the

a. loss in profit to the seller as the result of a negative externality.

b. cost of an externality.

c. cost reduction when the negative externality is eliminated.

d. cost incurred by the government when it intervenes in the market.

The difference between the social cost and private cost is a measure of the cost of an externality.

An externality causes a market to fail when allocating resources efficiently. A social cost results when you add up all of the private costs within an economy. Private costs are costs that are charged to the producer for their service of producing the good or service.