When negative externalities are present in a market
A)private costs will be greater than social costs.
B)social costs will be greater than private costs.
C)only government regulation will solve the problem.
D)the market will not be able to reach any equilibrium.

Question

Quizplus · Accepted Answer

Negative externalities are costs created by the production or consumption of a good or service that are imposed on third parties who have no control over the decision-making process. Private costs only take into account the costs to the producer or consumer, while social costs include the costs to society as a whole, including those imposed on third parties. Therefore, social costs will be greater than private costs when negative externalities are present.

When Negative Externalities Are Present in a Market