In the context of a market model, the effects of uncontrolled pollution include
A)Production levels that are too low
B)A positive external surplus
C)Deadweight loss
D)Reduced consumer surplus

Question

Quizplus · Accepted Answer

Uncontrolled pollution leads to a negative externality, meaning that the costs of pollution are being borne by parties other than the polluter. This leads to a market failure, as the market equilibrium does not reflect the true social costs of production. As a result, there is deadweight loss, as resources are not being allocated efficiently. Production levels may be too high or too low depending on the specifics of the market, but reduced consumer surplus is also a possible effect. A positive external surplus is not a relevant concept in this context.

In the Context of a Market Model, the Effects of Uncontrolled