The basic reason that a competitive unregulated market produces an inefficient amount of a good with an external cost because
A) producers cannot measure marginal social cost.
B) producers do not pay the external cost.
C) the general public does not care about external costs.
D) external costs are not a political issue.
E) the external cost is paid by consumers rather than producers.

Question

Quizplus · Accepted Answer

In an unregulated market, producers are not required to pay for external costs associated with their production, such as pollution. Therefore, they have no incentive to reduce their use of resources or production levels to reflect the true cost. This results in an inefficient amount being produced, as the true cost is not being taken into account.

The Basic Reason That a Competitive Unregulated Market Produces an Inefficient