When a competitively produced product generates negative externalities in produc

Question

When a competitively produced product generates negative externalities in production, the industry will A. over-produce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium. B. over-produce the good because marginal private cost is less than marginal private benefit in competitive equilibrium. C. under-produce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium. D, under-produce the good because marginal private social cost is less than marginal private benefit in competitive equilibrium in competitive equilibrium.

Explanation / Answer

C. under-produce the good because marginal social cost will exceed marginal social benefit in competitive equilibrium.

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