If a profit-maximizing competitive firm ________ compensate society for a negative externality, the firm will choose to produce where price equals marginal cost.
A) does not have to
B) is pressured to
C) voluntarily chooses to
D) is legally bound to

Question

Quizplus · Accepted Answer

When a profit-maximizing competitive firm does not have to compensate society for a negative externality, it will continue to produce where price equals marginal cost, ignoring the external costs its production imposes on society.

If a Profit-Maximizing Competitive Firm ________ Compensate Society for a Negative