In the case of a negative externality, the socially optimal output naturally exists if
A)the external costs associated with the negative externality are extremely small.
B)the external costs divided by price is equal to price divided by marginal private cost.
C)there are no free riders.
D)the public good aspects of the negative externality outweigh the costs incurred by the negative externality.
E)none of the above

Question

Quizplus · Accepted Answer

In the case of a negative externality, the socially optimal output does not naturally exist because the market fails to account for the external costs imposed on society. The options provided do not accurately describe conditions under which the socially optimal output would naturally exist without intervention.

In the Case of a Negative Externality, the Socially Optimal