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A market economy, without any government regulation, will produce: a
A market economy, without any government regulation, will produce:
a. Too little pollution,
b. Too much pollution,
c. The socially optimal quantity of pollution,
d. The amount of pollution that maximizes total surplus.
Expert Solution
The correct answer is b. Too much pollution.
A market economy without government regulations can also be called a free market economy. One of the negative outcomes of a free market is the market failures. Among the most common market failures are monopolies, inefficient allocation of resources, and negative externalities. Therefore, an increase in pollution is a frequent negative externality provoked by a market without regulations.
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