When a negative externality is not internalized,then the equilibrium price of the good produced is too ________ and the equilibrium quantity produced is too ________.

Question

Quizplus · Accepted Answer

When a negative externality (such as pollution) is not internalized, it means the social costs are not reflected in the market costs. As a result, the price of the good is lower than it should be if those externalities were accounted for, leading to overproduction and consumption. This makes the equilibrium quantity too high because the market does not account for the external costs imposed on society.

When a Negative Externality Is Not Internalized,then the Equilibrium Price