When the production of a good generates negative externality (i.e. external costs), is the good over-produced (i.e., qua

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When The Production Of A Good Generates Negative Externality I E External Costs Is The Good Over Produced I E Qua 1 (39.45 KiB) Viewed 37 times

When the production of a good generates negative externality (i.e. external costs), is the good over-produced (i.e., quantity produced is more than social optimum) or under- produced (i.e., quantity produced is less than social optimum)? Please explain. You can use graphs, in addition to sentences, in your explanation. According to the graph shown, if the competitive market goes from no policy to a price floor set at $10, what happens to consumer surplus (CS), producer surplus (PS), and social surplus (SS)? Please specify CS, PS and SS before and after the price floor, using areas labelled in the graph. $12 $10 S A $8 B $6 D $4 $2 1 C E 10