If the social cost of a polluting industry are greater than the social benefits, the social surplus is negative. True False

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UpStudy AI · Accepted Answer

The statement is **True**.

Here's the reasoning:

1. **Definitions**:
   - **Social Cost**: This refers to the total cost to society, including both private costs incurred by the industry and any external costs (like pollution) that affect third parties.
   - **Social Benefit**: This refers to the total benefit to society from the industry’s activities, including both private benefits and any external benefits.

2. **Social Surplus**: This is calculated as the difference between social benefits and social costs. It can be expressed as:
   $$
   \text{Social Surplus} = \text{Social Benefits} - \text{Social Costs}
   $$

3. **Analysis**:
   - If the social costs of a polluting industry are greater than the social benefits, it means:
   $$
   \text{Social Costs} > \text{Social Benefits}
   $$
   - Therefore, substituting this into the social surplus formula gives:
   $$
   \text{Social Surplus} = \text{Social Benefits} - \text{Social Costs} < 0
   $$
   - This indicates that the social surplus is negative.

Thus, when the social costs exceed the social benefits, the social surplus is indeed negative.
If the social costs of a polluting industry are greater than the social benefits, the social surplus is negative.

If the social cost of a polluting industry are greater than the social benefits, the social surplus is negative. True False

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