Question

what will happen when negative externalities are present in a market?
a) the market will not be able to reach an equilibrium situation.
b) social costs will be greater than private costs.
c) government will regulate the externalities in the market.
d) private costs will be greater than social costs.

Explanation:

Negative externalities occur when the production or consumption of a good or service imposes costs on a third - party not involved in the transaction. Social cost is the sum of private cost and external cost. With negative externalities, external costs are positive, making social costs higher than private costs.

Answer:

B. Social costs will be greater than private costs.