A competitive,unregulated market would
A) produce too much pollution because pollution is an external cost.
B) produce too little education because education has an external benefit.
C) fail to achieve equilibrium if there are externalities present.
D) Both answers A and B are correct.
E) Both answers B and C are correct.

Question

Quizplus · Accepted Answer

Both A and B are correct because they describe situations where externalities (costs or benefits not reflected in market prices) lead to market failures. Pollution is an external cost not accounted for by the market, leading to overproduction of polluting goods. Education provides external benefits beyond the individual, leading to underproduction in an unregulated market.

A Competitive,unregulated Market Would