In the case of a negative externality:

Question

Select one:
a. the private market does not produce enough of the good.
b. market price reflects the social costs of production.
c. efficiency requires that the government impose a subsidy.
d. market price reflects only the private costs of production.
e. the market price is above the efficient price.

i have gone with b but really doubt myself?

Answer 1

I think you're right. The social costs are external to the transaction between producer and customer.