When externalities are present in a market,what is the result
A)The established equilibrium maximizes the total benefit to society as a whole.
B)Market participants lose some market benefits to bystanders.
C)Both equity and efficiency are maximized.
D)The market fails to allocate resources efficiently.

Question

Quizplus · Accepted Answer

When externalities are present in a market, the market fails to allocate resources efficiently as the market price does not reflect the full social cost or benefit of the good or service. This leads to either overproduction or underproduction of the goods or services and results in welfare losses for the society. Therefore, D is the correct answer.

When Externalities Are Present in a Market,what Is the Result