When external costs are present in a market,
A) less of the good will be produced than the amount consistent with economic efficiency.
B) more of the good will be produced than the amount consistent with economic efficiency.
C) the amount of the good produced will be equal to the amount consistent with economic efficiency.
D) corresponding external benefits are always generated.

Question

Quizplus · Accepted Answer

When external costs are present, the market fails to account for these costs, leading to overproduction relative to the socially optimal level, which is consistent with economic efficiency.

When External Costs Are Present in a Market