Environmental problems result when social costs and benefits are different from private costs and benefits.

Question

Quizplus · Accepted Answer

Environmental problems often arise when the costs and benefits of activities that cause harm or benefit to the environment are not fully reflected in the prices charged in the marketplace. This creates a situation where individuals or companies may engage in activities that are harmful to the environment because they do not bear the full costs of those activities, while others may not engage in activities that would be beneficial to the environment because there is no financial incentive to do so. This is known as a "market failure" and is a common cause of environmental problems.

Environmental Problems Result When Social Costs and Benefits Are Different