If there are external costs of production and perfectly competitive firms do not account for these costs, at the equilibrium level of output
A. P > MC and P = MSC.
B. P = MC and P < MSC.
C. P = MC = MSC.
D. P = MC and P > MSC.
Answer: B
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A) the entire $2 is paid by the consumer. B) the entire $2 is paid by the producer. C) both the consumer and producer pay $2 each. D) the consumer pays part of the $2 and the producer pays the rest.