When negative externalities exist, the private market equilibrium represents a
A) market price which is too low and a market quantity which is too low.
B) market price which is too low and a market quantity which is too high.
C) market price which is too high and a market quantity which is too low.
D) market price which is too high and a market quantity which is too high.

Question

Quizplus · Accepted Answer

Negative externalities lead to overproduction, meaning the market quantity is too high, and the market price is too low because not all costs (externalities) are accounted for in the market price.

When Negative Externalities Exist, the Private Market Equilibrium Represents a