The presence of negative externalities leads to a misallocation of societal resources because:
A)whenever external costs are imposed on outside parties, the good should not be produced at all.
B)less of the good than is ideal for society is produced.
C)there are some costs associated with production that the producer fails to take into consideration.
D)the government always intervenes in markets when negative externalities are present, and the government is inherently inefficient.

Question

The presence of negative externalities leads to a misallocation of societal resources because:
A)​whenever external costs are imposed on outside parties, the good should not be produced at all.
B)​less of the good than is ideal for society is produced.
C)​there are some costs associated with production that the producer fails to take into consideration.
D)​the government always intervenes in markets when negative externalities are present, and the government is inherently inefficient.

Quizplus · Accepted Answer

Negative externalities occur when the production or consumption of a good imposes costs on third parties that are not reflected in the market prices. This means producers do not account for these external costs in their production decisions, leading to overproduction from a societal perspective.

The Presence of Negative Externalities Leads to a Misallocation of Societal