If the government overcorrected in a situation of external costs
A)More than the efficient amount of the good would end up being produced.
B)Less than the efficient amount of the good would end up being produced.
C)It would result in a welfare cost in that market.
D)Both b and c are would result.

Question

If the government overcorrected in a situation of external costs
A)​More than the efficient amount of the good would end up being produced.
B)​Less than the efficient amount of the good would end up being produced.
C)​It would result in a welfare cost in that market.
D)Both b and c are would result.

Quizplus · Accepted Answer

If the government overcorrects, it could lead to less than the efficient amount of the good being produced, resulting in a welfare cost due to underproduction.

If the Government Overcorrected in a Situation of External Costs