External benefits cause the market to:
a. underallocate resources. b. be more efficient.
c. set excessively high prices. d. have persistent shortages.
Question 2
Why do negative externalities like pollution result in inefficiency?
a. Because producers artificially restrict their supply.
b. Because producers ignore the external costs they impose on third-parties.
c. Because producers manufacture more goods than people can afford to buy.
d. Because producers will receive an unequal distribution of profits.
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