If negative externalities are present in a market,________.
A) the market price is higher than the socially optimal price
B) the quantity supplied in the market is larger than the socially optimal level
C) the marginal social cost of production is lower than the marginal private cost
D) the average cost of production exceeds the marginal cost of production at all output levels

Question

Quizplus · Accepted Answer

Negative externalities lead to overproduction, meaning the quantity supplied is larger than the socially optimal level because the external costs are not reflected in the market price.

If Negative Externalities Are Present in a Market,________