What describes the outcome generated by a market when production decisions are based on both private and external costs

Overproduction occurs when goods are produced beyond the socially optimal level, often due to ignoring external costs. If only private costs are considered, producers may create more goods than is beneficial for society, leading to negative externalities. However, including external costs ensures that production levels are adjusted to avoid this inefficiency.

Underproduction happens when the market produces fewer goods than the socially optimal amount, often due to neglecting external benefits. If external costs are considered, it could lead to reduced production levels, but when both private and external costs are included, the goal is to achieve an optimal production level, not underproduce.

Social costs are the total costs to society, including both private costs incurred by producers and external costs imposed on others. While understanding social costs is essential for efficient production, simply defining them does not describe the outcome of production decisions based on these costs. The efficient outcome reflects how these costs are integrated into decision-making.