When negative externalities are connected with the production of a good,
A)market output will be greater than the socially optimal output.
B)private costs and social costs are equal.
C)the government should subsidize the production of the good.
D)there will be a shortage of the good.

Question

Quizplus · Accepted Answer

Negative externalities mean that the production of a good imposes additional costs on society that are not reflected in the private costs of production. As a result, without intervention, the market will produce more of the good than is socially optimal, because the market price does not account for the external costs.

When Negative Externalities Are Connected with the Production of a Good