If a good generates an external cost,the market will produce:

Name: If a good generates an external cost,the market will produce:
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Question

Quizplus · Accepted Answer

When a good generates an external cost, the market will produce too much of the good. This is because the external cost is not reflected in the price of the good, and therefore producers do not take it into account when deciding how much of the good to produce. As a result, they will produce more than the socially optimal level, leading to a market failure.

If a Good Generates an External Cost,the Market Will Produce