Suppose that beef producers create a negative externality. What is the relationship between the equilibrium quantity of beef and the socially optimal quantity of beef?
A)They are equal.
B)The equilibrium quantity is greater than the socially optimal quantity.
C)The equilibrium quantity is less than the socially optimal quantity.
D)There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

When a negative externality is present, the equilibrium quantity in the market is greater than the socially optimal quantity because the external costs are not reflected in the market price.

Suppose That Beef Producers Create a Negative Externality