If the market price of a good does NOT include all of the costs and benefits that arise from the production or consumption of the good, then

Question

Quizplus · Accepted Answer

When the market price of a good does not reflect all of the costs and benefits, it is an indication that an externality is present. Externalities result from the production or consumption of a good and have an impact on parties not directly involved in the transaction. The lack of integration of these costs or benefits into the market price can lead to market failures and suboptimal allocation of resources.

If the Market Price of a Good Does NOT Include