The Market Will Overproduce Goods That Have External Costs Because

The market will overproduce goods that have external costs because

A) Producers do not take into account those external costs.
B) Producers experience higher costs than society.
C) The government is not able to produce these goods.
D) Producers cannot keep the goods from consumers who don't pay, so they produce a greater amount. When external costs are present, the price signal confronting producers is flawed because it does not convey the full (social) cost of scarce resources; therefore the market encourages excessive production and pollution.