A market that generates a negative externality that has not been internalised generates an equilibrium quantity that is less than the optimal quantity.

Name: A market that generates a negative externality that has not been internalised generates an equilibrium quantity that is less than the optimal quantity.
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Question

Quizplus · Accepted Answer

A market with a negative externality produces more than the socially optimal quantity because the external costs are not reflected in the market price, leading to overproduction.

A Market That Generates a Negative Externality That Has Not