If a good that generates negative externalities were priced to take these negative externalities into account, 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 a good that generates negative externalities is priced to take these negative externalities into account, the price of the good increases to cover the cost of the negative effects it has on society. As a result, the quantity demanded for the good decreases because consumers are less willing to pay the higher price. This leads to a decrease in the output of the good, as producers are no longer able to sell as much at the higher price. Therefore, the correct answer is that the price would increase and the output would decrease.

If a Good That Generates Negative Externalities Were Priced to Take