Pollution occurs when lumber is produced. If the lumber market is unregulated, there would be
A)overproduction of lumber compared to the efficient amount.
B)underproduction of lumber compared to the efficient amount.
C)sometimes overproduction and sometimes underproduction of lumber compared to the efficient amount.
D)an external benefit from producing lumber.
E)no deadweight loss from production.

Question

Quizplus · Accepted Answer

Without regulation, firms will not take into account the negative externalities of pollution in their production decisions. This will lead to overproduction of lumber compared to the efficient amount as the cost of pollution is not factored in. Therefore, there will be a negative impact on society, resulting in a market failure.

Pollution Occurs When Lumber Is Produced