Suppose that a steel factory emits a certain amount of air pollution.If this market is NOT required to internalize this externality,what will happen
A)The supply curve would adequately reflect the marginal social cost of production.
B)Consumers will be required to pay a higher price for steel than they would have if the externality were internalized.
C)The market equilibrium would not be the socially optimal quantity.
D)Producers will produce less steel than they otherwise would have if the externality were internalized.

Question

Quizplus · Accepted Answer

When a market is not required to internalize externalities, the market equilibrium would not be the socially optimal quantity. In this case, the price of steel would not reflect the extra costs associated with pollution, and producers would be incentivized to produce more steel than would be socially optimal. This leads to an overproduction of steel and an overconsumption of resources. Therefore, choice C is the best answer.

Suppose That a Steel Factory Emits a Certain Amount of Air