When resource prices reflect true social costs
A) external diseconomies must be present.
B) profit-maximizing firms will tend to produce socially desirable amounts of output.
C) firms will not use any air or water in their production processes.
D) production will cease.
E) firms realize no net benefits from continued production.

Question

Quizplus · Accepted Answer

When resource prices reflect true social costs, profit-maximizing firms will tend to produce socially desirable amounts of output. This is because they will internalize the external costs associated with their production processes and adjust their output levels accordingly to maximize their profits, while also minimizing negative impacts on society.

When Resource Prices Reflect True Social Costs