Presence of negative externalities causes the market equilibrium quantity of the product to be (relative to what is socially optimal)

Question

Quizplus · Accepted Answer

Negative externalities cause the market to produce more of a product than is socially optimal because the external costs are not reflected in the market prices. This leads to overproduction relative to what would be considered socially optimal.

Presence of Negative Externalities Causes the Market Equilibrium Quantity of the Product