If an unregulated industry generates pollution, the market price is _____ than the socially optimal price, and the market quantity is _____ than the socially optimal quantity.

Question

Quizplus · Accepted Answer

When an unregulated industry generates pollution, it does not bear the full cost of its production, leading to a lower market price than the socially optimal price. This lower price encourages higher consumption, resulting in a market quantity that is greater than the socially optimal quantity.

If an Unregulated Industry Generates Pollution, the Market Price Is