In the case of either a positive or negative externality, a good's market price will:
A)be too low.
B)be too high.
C)not fully reflect a good's social marginal cost or social marginal benefit.
D)not equate the quantity supplied by sellers with the quantity demanded by buyers.

Question

Quizplus · Accepted Answer

When there are externalities, the market equilibrium price will not fully capture a good's social marginal cost or social marginal benefit.

In the Case of Either a Positive or Negative Externality