If a good that involves external costs is priced to take these costs into account, then its:
A) price would fall and output would go up.
B) price would rise and output would fall.
C) price would not change but output would fall.
D) price would rise but output would stay the same.

Question

Quizplus · Accepted Answer

When a good's external costs are taken into account, the price of the good will increase to reflect the full cost of production, leading to a decrease in the quantity demanded (output). This is because consumers are less likely to want to pay a higher price for the good. Therefore, the best answer is B.

If a Good That Involves External Costs Is Priced to Take