When negative externalities are present in a market,what will result
A)Producers will be affected, but not consumers.
B)Overproduction will occur.
C)Demand will be too high.
D)The market will still maximize total benefits.

Question

Quizplus · Accepted Answer

When negative externalities are present in a market, overproduction will occur because the cost of production is not fully reflected in the price, leading to a surplus supply. Producers may continue to produce goods even if the marginal social cost is higher than the marginal private cost. This results in inefficiency, as resources are not being allocated optimally, and negative externalities are not being taken into account. Consumers may also be affected in the long run, as the negative externalities have consequences for public health, the environment or other costs that may be passed on to them. The market may not maximize total benefits, as some costs are not accounted for and are therefore not included in the allocation of resources.

When Negative Externalities Are Present in a Market,what Will Result