Because the general market mechanism does not take into account the side effects that harm bystanders, a market economy will produce _____ without any government regulation.

Question

Quizplus · Accepted Answer

In a market economy, firms seek to maximize profits and will only take into account the costs and benefits of their own production activities, not the costs imposed on bystanders or the environment. This often leads to the production of too much pollution and harm to bystanders. Therefore, without government regulation, a market economy will produce too much pollution.

Because the General Market Mechanism Does Not Take into Account