If negative externality is included in the price, we would expect:

Question

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When a negative externality is included in the price, producers will face higher costs, which will lead to a reduction in production. However, since the externality cost is included in the price, consumers will also face higher prices, resulting in an increase in the price of the product. Therefore, we would expect a reduction in production and an increase in price.

If Negative Externality Is Included in the Price, We Would