An industry with production that generates external costs produces a quantity of output that is:
A)socially optimal.
B)smaller than the socially optimal quantity.
C)larger than the socially optimal quantity.
D)socially optimal if a specific subsidy is given to buyers.

Question

Quizplus · Accepted Answer

Industries that generate external costs, such as pollution, typically produce a quantity of output that is larger than the socially optimal quantity. This is because they do not bear the full cost of their production, leading to overproduction from a societal perspective.

An Industry with Production That Generates External Costs Produces a Quantity