When government makes it possible to externalize the cost of a good:
A) there will be an optimal quantity of the good.
B) there will be an insufficient quantity of the good.
C) there will be too much of the good.
D) the good will not be produced at all.

Question

Quizplus · Accepted Answer

When the government allows externalizing the cost of a good, it means that the producers are not paying the full cost of the production, which could be harmful to the environment or society. As a result, producers can offer the good at a lower price than its actual cost, leading to an increase in its consumption. Hence, there will be too much of the good in the market, which could lead to negative consequences for the environment and society in the long run.

When Government Makes It Possible to Externalize the Cost of a Good