When Negative Externalities Are Present, It Leads to an Underallocation

question 57

True/False

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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Definitions:

Compensatory

Refers to mechanisms or behaviors aimed at offsetting deficiencies or disadvantages.

Western Culture

A social and cultural tradition originating from Western Europe and broadly influencing the Americas, Australia, and parts of Asia, characterized by emphasis on individualism, democracy, and scientific progress.

Empirical Science

A science based on observation and experiment rather than theory alone.

Materialism

The belief or attitude that physical possessions and their acquisition are more important than spiritual or ethical values.