When there is no market for a negative externality,the producer of the externality _____.
A)has strong incentive to consider the costs it imposes on others
B)will try to create a market
C)will limit production of the good producing the externality
D)has no incentive to consider the costs it imposes on others

Question

Quizplus · Accepted Answer

When there is no market for a negative externality, the producer does not have any direct economic incentives to consider the costs it imposes on others. This is because the market price of the good does not reflect the full social costs, and thus, the producer may continue to produce as much as it wants without bearing the true costs of the externality.

When There Is No Market for a Negative Externality,the Producer