If a good that generates negative externalities were priced to account for spillover costs,then its:
A) price would decrease and its output would increase.
B) output would increase,but its price would remain constant.
C) price would increase and its output would decrease.
D) price would increase,but its output would remain constant.

Question

Quizplus · Accepted Answer

When the price of a good that generates negative externalities is adjusted to include spillover costs, the price would increase, and the output would decrease. This is because the new price would reflect the full cost of producing the good, including the cost to those affected by the negative externalities. As a result, consumers would be less willing to purchase the good at the higher price, and producers would be less incentivized to produce it at a lower output level. Thus, the equilibrium quantity would decrease, and the equilibrium price would increase.

If a Good That Generates Negative Externalities Were Priced to Account