When negative externalities are present, it leads to an underallocation of resources in that area relative to that which is socially desirable.

Name: When negative externalities are present, it leads to an underallocation of resources in that area relative to that which is socially desirable.
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Question

Quizplus · Accepted Answer

Negative externalities lead to an overallocation of resources in that area relative to what is socially desirable, as the external costs are not fully accounted for by the producers or consumers.

When Negative Externalities Are Present, It Leads to an Underallocation