The basic reason that a competitive unregulated market produces an inefficient amount of a good with an external cost is because
A) external costs are not a political issue.
B) the general public does not care about external costs.
C) producers cannot measure marginal social cost.
D) the external cost is paid by consumers rather than producers.
E) producers do not pay the external cost.

Question

Quizplus · Accepted Answer

In a competitive unregulated market, producers do not pay the external cost of producing a good, as it is paid by society as a whole. This means that producers do not take into account the full cost of production when making decisions about how much to produce, leading to an inefficient outcome where too much of the good is produced.

The Basic Reason That a Competitive Unregulated Market Produces an Inefficient