What will arise when negative externalities are present in a market
A)Private costs will be greater than social costs.
B)Social costs will be greater than private costs.
C)Government will regulate the externalities in the market..
D)The market will not be able to reach any equilibrium situation.

Question

Quizplus · Accepted Answer

Negative externalities exist when the social costs of economic activity are greater than the private costs. This means that the costs to society as a whole are higher than the costs incurred by individuals engaging in the activity. In this situation, private decision-making in the market will not account for the full costs of the activity, leading to an inefficient outcome. As a result, there is a role for government intervention to regulate or internalize these externalities and ensure that the market reaches a socially efficient outcome.

What Will Arise When Negative Externalities Are Present in a Market