Generating electricity using coal creates air pollution. This industry, if left unregulated, will produce at an inefficient market equilibrium because
A) there is a deadweight loss.
B) supply is not equal to demand.
C) too little output is produced.
D) the marginal social benefit is greater than the marginal social cost.

Question

Quizplus · Accepted Answer

Generating electricity using coal creates negative externalities in the form of air pollution. This means that the marginal social cost of producing electricity using coal is greater than the marginal private cost. As a result, the market equilibrium will be inefficient, with too much output being produced.

Generating Electricity Using Coal Creates Air Pollution