If pollution is created when producing a product, then the market equilibrium price is too high and equilibrium quantity is too low.

Question

Quizplus · Accepted Answer

When pollution is created, it is a negative externality, which means the social cost is higher than the private cost. This typically results in a market equilibrium price that is too low and an equilibrium quantity that is too high, as the external costs are not reflected in the market price.

If Pollution Is Created When Producing a Product, Then the Market