Which of the following statements is most correct about a market that is characterised by a negative production externality?
A)the equilibrium quantity of output is equal to the socially optimal quantity
B)the equilibrium quantity of output is greater than the socially optimal quantity
C)government intervention is only required for negative externalities
D)the equilibrium quantity of output is less than the socially optimal quantity

Question

Quizplus · Accepted Answer

In a market with a negative production externality, the cost to society of producing an additional unit of a good is higher than the cost to the producer. This leads to overproduction from a societal perspective, meaning the equilibrium quantity of output is greater than the socially optimal quantity.

Which of the Following Statements Is Most Correct About a Market