Compared to ideal economic efficiency, when the production of a good generates external costs, competitive markets will likely result in an output that is too
A) large and a price that is too high.
B) large and a price that is too low.
C) small and a price that is too high.
D) small and a price that is too low.

Question

Quizplus · Accepted Answer

When external costs are present, the market fails to account for these costs, leading to overproduction and a lower price than would be efficient.

Compared to Ideal Economic Efficiency, When the Production of a Good