Negative Externalities in Production The intersection of the demand curve and the social-cost curve determines the optimal output level o The socially optimal output level is less than the market equilibrium quantity H arc Inc items and derived items copyright o 2001 by Harcourt, IncHarcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Negative Externalities in Production The intersection of the demand curve and the social-cost curve determines the optimal output level. uThe socially optimal output level is less than the market equilibrium quantity