If the production of a good gives rise to external diseconomies, then less of the good is being produced than is socially optimal.

Question

Quizplus · Accepted Answer

External diseconomies occur when the production of a good imposes costs on third parties not involved in the transaction, which can lead to overproduction of the good relative to the socially optimal level, as the market price does not reflect these external costs.

If the Production of a Good Gives Rise to External