Studies have shown that producing Good X generates pollution that is harmful - even for consumers who may not purchase/consume Good X themselves. If prices for this good are simply determined in a free market, which of the following will occur? O The market price of Good X will be too low and the quantity produced and sold will be too high. O The market will be efficient because markets always regulate marginal benefits and marginal costs of all consumers. O The market price of Good X will reflect the marginal social benefit received by nonconsumers of Good X. O The market price of Good X will be efficient but the quantity produced and sold will be too high. O The price of Good X will overstate the true external costs imposed on nonconsumers of Good X.

Studies have shown that producing Good X generates pollution that is harmful - even for consumers who may not purchase/consume Good X themselves. If prices for this good are simply determined in a free market, which of the following will occur? O The market price of Good X will be too low and the quantity produced and sold will be too high. O The market will be efficient because markets always regulate marginal benefits and marginal costs of all consumers. O The market price of Good X will reflect the marginal social benefit received by nonconsumers of Good X. O The market price of Good X will be efficient but the quantity produced and sold will be too high. O The price of Good X will overstate the true external costs imposed on nonconsumers of Good X.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter15: The Shortcomings Of Free Markets

Section: Chapter Questions

Problem 2TY

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