Question

Consider a market where production of a good generates a negative externality. In the market equilibrium:_________.a. there is no deadweight loss. b. firms are not maximizing profit. c. too little of the good is being produced. d. too much of the food is being produced e. the external costs have been internalized,

Answer 1

Answer:

d. too much of the good is being produced

Explanation:

A good has negative externality if the costs to third parties not involved in production is greater than the benefits. an example of an activity that generates negative externality is pollution. Pollution can be generated at little or no cost, so they are usually overproduced. Government can discourage the production of activities that generate negative externality by taxation