Markets are often inefficient when negative externalities are present because

a. externalities cannot be corrected without government regulation.

b. private costs exceed social costs at the private market solution.

c. production externalities lead to consumption externalities.

d. social costs exceed private costs at the private market solution.

Question

Business

Allen Henderson

15 March, 05:50

Markets are often inefficient when negative externalities are present because

a. externalities cannot be corrected without government regulation.

b. private costs exceed social costs at the private market solution.

c. production externalities lead to consumption externalities.

d. social costs exceed private costs at the private market solution.

+2

Answers (2)

Know the Answer?

Amir Flores · Answer 1

D) social costs exceed private costs at the private market solution.

Explanation:

A negative externality occurs when one individual's or one company's actions have a negative effect on the well-being of a bystander who is not involved in any type of transaction with the individual or the company.

IN a market, negative externalities directly affect the well-being of the individuals that participate in the market, and indirectly affect the well-being of market bystanders. Therefore the total cost to society will be larger than the cost to the market, since the market is a part of society.

Jaqueline Case · Answer 2

B.

Negative externaliteis are a result of overproduction, meaning that the producer's private cost is higher than the social cost, therefore the private market is to be at blame.