In the presence of negative externalities, ________ is produced and in the presence of positive externalities, ________ is produced.
A) too little of the good; too much of the good
B) too much of the good; too little of the good
C) too much of the good; the right amount of the good
D) the right amount of the good; too little of the good

Question

Quizplus · Accepted Answer

In the presence of negative externalities (e.g., pollution), producers do not bear the full cost of production, leading to overproduction. Conversely, with positive externalities (e.g., education), not all benefits are captured by the producer, leading to underproduction.

In the Presence of Negative Externalities, ________ Is Produced and in the Presence