If there is a negative externality which of the ollowing will be true? 1 pts O T
ID: 1162384 • Letter: I
Question
If there is a negative externality which of the ollowing will be true? 1 pts O The government must produce the good. O The private market will produce too little of the good. O The private market price will be too low OThe government must prevent the production of the good D Question 12 1 pts Kim has a lemonade stand and the social costs are $10 and her private costs are $10, t can be said that the external cost is and that market failure 0 $0; does not occur O $0; occurs O $400; occurs o $400, does not occurExplanation / Answer
11)
In case of negative externalities, producer does not take into account negative external cost. Hence, producer tends to overproduce. Thus, government must prevent production of the good.
Hence, right answer is “ The government must prevent the production of the good”
12)
Social cost = Private cost + External cost.
10 = 10 + 0
Hence, external cost is zero and market failure does not occur.
Right answer is $ 0 ; does not occur.