The presence of negative externalities that are incorporated in price, results in misallocation of resources.

Question

Quizplus · Accepted Answer

The presence of negative externalities that are incorporated in price, such as taxes or regulations, can actually help to correct the market's misallocation of resources. This is because the cost of the externality is now reflected in the price of the good, encouraging consumers to choose alternative products that are less harmful to society. Therefore, incorporating negative externalities in price can lead to a more efficient allocation of resources.

The Presence of Negative Externalities That Are Incorporated in Price