Unregulated competitive markets for services with negative externalities, such as gambling, tend to

Question

Quizplus · Accepted Answer

Unregulated competitive markets for services with negative externalities tend to produce too much of the service to be efficient because the market fails to consider the social costs of such services, leading to a market failure. In the case of gambling, excessive gambling can lead to addiction, bankruptcy, and other negative social consequences. As a result, the private marginal benefit of gambling exceeds social marginal benefit, leading to overconsumption.

Unregulated Competitive Markets for Services with Negative Externalities, Such as Gambling