In a Market Where Negative Externalities Are Associated with Consumption

question 78

Multiple Choice

In a market where negative externalities are associated with consumption and production, the equilibrium will not be efficient because

• A) too few resources will be allocated toward producing the good.
• B) firms will shut down until costs are reduced.
• C) costs of production will, on average, be too high.
• D) too many resources will be allocated toward producing the good.

---

Definitions:

Mass Transportation

A system of large-scale public transportation services, such as buses and trains, that operate within or between cities.

Price

The monetary value associated with procuring a product or service.

Production Cost

The total expense incurred in manufacturing goods or providing services, including raw materials, labor, and overheads.

Market

The arena in which buyers and sellers interact to exchange goods, services, or financial instruments, determined by supply and demand.