When the production of a good entails spillover costs, too little of a good is produced and there is an under-allocation of resources to its use.

Question

Quizplus · Accepted Answer

When the production of a good entails spillover costs (also known as negative externalities), too much of the good is produced from society's perspective, leading to an over-allocation of resources to its production.

When the Production of a Good Entails Spillover Costs, Too