If there is an external cost from making paper, an unregulated competitive market produces
A) less than the efficient quantity.
B) the efficient quantity.
C) more than the efficient quantity.
D) a quantity that could be greater than, the same as, or less than the efficient amount.

Question

Quizplus · Accepted Answer

An external cost means that the social cost of production is higher than the private cost. In an unregulated market, firms do not account for this external cost, leading to overproduction compared to the efficient quantity where social costs are minimized.

If There Is an External Cost from Making Paper, an Unregulated