All externalities
A)cause markets to fail to allocate resources efficiently.
B)cause equilibrium prices to be too high.
C)benefit producers at the expense of consumers.
D)cause equilibrium prices to be too low.

Question

Quizplus · Accepted Answer

Externalities, whether positive or negative, can result in market failures where the price mechanism fails to achieve allocative efficiency. This is because the price that consumers pay for a good or service does not reflect the full cost or benefit of its production or consumption. As a result, externalities can lead to an overproduction or underproduction of the good or service, which is not socially optimal.

All Externalities