Exhibit 30-4

-Refer to Exhibit 30-4. If a negative externality exists, then the market ____________output by the amount ________________.

Question

Exhibit 30-4
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-Refer to Exhibit 30-4. If a negative externality exists, then the market ____________output by the amount ________________.

Quizplus · Accepted Answer

When a negative externality exists, the market overproduces because the social cost is higher than the private cost, leading to production beyond the socially optimal level. The amount of overproduction is the difference between the quantity produced by the market and the socially optimal quantity.

Exhibit 30-4 ​

Exhibit 30-4