If negative externalities are generated in the production of a good, then society will:
A)produce too much of the good because the private cost of production is greater than the social cost of production.
B)produce too little of the good because the private cost of production is less than the social cost of production.
C)produce too much of the good because the private cost of production is less than the social cost of production.
D)produce too little of the good because the private cost of production is greater than the social cost of production.
E)produce too little of the good because the private cost of production is less than the private benefit from the good.

Question

Quizplus · Accepted Answer

Negative externalities mean that the social cost of production is higher than the private cost faced by producers. As a result, producers do not account for the external costs, leading to overproduction of the good.

If Negative Externalities Are Generated in the Production of a Good