If producing a good or a service creates pollution,then
A) an unregulated competitive market produces an efficient output.
B) the industry's supply curve includes the extra cost of pollution.
C) at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price.
D) at the unregulated, competitive market equilibrium quantity, marginal social benefit and marginal social cost are equal.
E) at the unregulated, competitive market equilibrium quantity, marginal social benefit is less than the equilibrium price.

Question

Quizplus · Accepted Answer

In the presence of pollution, an unregulated competitive market does not account for the external costs (such as environmental damage) that production imposes on society. Therefore, the marginal social cost (which includes both the private costs and the external costs like pollution) is higher than the equilibrium price, which reflects only the private costs and benefits. This discrepancy leads to overproduction and inefficiency because the full social costs are not considered in the market outcome.

If Producing a Good or a Service Creates Pollution,then