If firms were required to pay the full social costs of the production of goods, including both private and external costs, other things being equal, there would probably be:

Question

Quizplus · Accepted Answer

If firms were required to pay the full social costs of production, which includes both private costs and external costs, they would experience an increase in costs. Consequently, to maintain profitability, they may reduce their production levels, resulting in a decrease in production. The misallocation of resources would also be minimized, as firms would have to account for the full costs of production. The market price of the product may increase or decrease depending on the specific product and market conditions, but it is not an automatic consequence of firms paying the full social costs of production.

If Firms Were Required to Pay the Full Social Costs