When external costs are involved, too much is produced by unregulated private markets.

Question

Quizplus · Accepted Answer

External costs refer to costs that are not factored into the price of goods or services and are instead borne by society as a whole. If unregulated private markets produce too much, they are not taking into account these external costs and are therefore creating more harm than good. This is known as market failure and is a key reason why government intervention is often necessary to regulate private markets.

When External Costs Are Involved, Too Much Is Produced by Unregulated