When production results in environmental degradation, private firms do not take the ________ into consideration when making their output decisions resulting in ________.

Question

Quizplus · Accepted Answer

Private firms often do not take into account the external costs (negative effects on the environment) when deciding their output levels. This results in a market failure where the market price of the good does not fully reflect the true cost to society, leading to overproduction and environmental degradation. This is referred to as a negative externality. Therefore, option A is the correct answer.

When Production Results in Environmental Degradation, Private Firms Do Not