When external costs exist,

Name: When external costs exist,
Brand: Quizplus
Rating: 4.7 (64 reviews)

Question

Quizplus · Accepted Answer

External costs are costs that are not reflected in market prices, such as pollution generated by a factory or the health costs associated with smoking. Because these costs are not factored into the price of the product, there is a market failure and the market does not achieve the optimal mix of output. The best solution is often for the government to intervene and impose regulations or taxes to internalize the external costs.

When External Costs Exist