Question

When are negative externalities present?

Answer 1

Answer:

The negative externalities are present when there is a market failure. The answer is B.

Explanation:

When negative externalities are present, it means the producer does not bear all costs, which results in excess production. With positive externalities, the buyer does not get all the benefits of the good, resulting in decreased production. Let's look at a negative externality example of a factory that produces widgets. Remember, it pollutes the environment during the production process. The cost of the pollution is not borne by the factory, but instead shared by society.

If the negative externality is taken into account, then the cost of the widget would be higher. This would result in decreased production and a more efficient equilibrium. In this case, the market failure would be too much production and a price that didn't match the true cost of production, as well as high levels of pollution.