The existence of negative externalities:
A) prevents the market from working efficiently.
B) prevents government from intervening in the marketplace.
C) causes the market to work more effectively.
D) necessarily means that government must intervene in the marketplace.

Question

Quizplus · Accepted Answer

Negative externalities lead to market inefficiencies because they result in a cost to society that is not reflected in the market price, causing overproduction or overconsumption of the good or service.

The Existence of Negative Externalities