Respuesta :
Answer:
D. The government will prevent production of the good
Explanation:
Externalities are benefit or harm to third party , without being reflected in prices . Positive & Negative Externalities are benefits & harms to third party respectively . Egs : Education & Pollution (resp.)
Positive Externalities : Total Benefit = Private Benefit + Social Benefit
Negative Externalities : Total Cost = Private Cost + Social Cost
But - Market Production happens at : Private Marginal Benefit = Private Marginal Cost .This leads to underproduction of positive externalities ,over production of negative externalities .
So govt takes corrective meassures to boost the underproduction of positive externalities & to curtail overproduction of negative externalities .
An externality is a cost or benefit incurred or received by a producer that is not paid for by that producer. Externalities can be negative or positive, and they can arise from the consumption or production of a product or service.
Option D is true when the production of goods results in negative externalities.
The reasons why it's true:
- Externalities are advantages or disadvantages to third parties that are not reflected in prices.
- Positive & Negative Externalities are benefits & harms to the third parties correspondingly.
Consider the following examples:
- Education and pollution (resp.)
Externalities have a positive outcome: Total Benefit = Private Benefit + Social Benefit.
Externalities with Negative Effects: Total Cost = Private Cost + Social Cost.
- However, market production occurs when the private marginal benefit equals the private marginal cost.
- As a result, positive externalities are underproduced while negative externalities are overproduced.
As a result, the government takes corrective actions to increase the underproduction of positive externalities while reducing the overproduction of negative externalities.
For more information about negative externalities, refer below:
https://brainly.com/question/5301972
