Suppose that a steel factory emits a certain amount of air pollution and that this pollution constitutes a negative externality.If this market is not required to internalise this externality:
A)the supply curve would adequately reflect the marginal social cost of production
B)consumers will be required to pay a higher price for steel than they would have if the externality were internalised
C)the market equilibrium would not be the socially optimal quantity
D)producers will produce less steel than they otherwise would have if the externality were internalised

Question

Quizplus · Accepted Answer

Without internalising the negative externality, the market equilibrium would not account for the cost imposed on society due to pollution. As a result, the quantity produced and consumed in the market would not be the socially optimal quantity.

Suppose That a Steel Factory Emits a Certain Amount of Air