A negative externality occurs when a third party suffers a cost that is not reflected in the market price. In such a case, compared to the social optimum, the market will produce:

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Economics · Externalities

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Too much output at too low a price

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Answer 1

Too little output at too high a price

Answer 2

The socially optimal output

Answer 3

Too much output at too low a price

Answer 4

Too little output at too low a price

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