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Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, the equilibrium price:

A) and output are too low to be optimal.

B) and output are too high to be optimal.

C) is too low to be optimal, and equilibrium quantity is too high.

D) is too high to be optimal, and equilibrium quantity is too low.

E) is optimal, but there is an excess supply.

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Answer:

The correct answer is (D)

Explanation:

A negative externality is a cost that is endured by an outsider as an outcome of a financial exchange. In economic exchange, the manufacturer and customer are the first and second parties, and the third party is the one who suffers from the transaction it incorporates any individual, association, land, and owner. The dry-cleaning business is creating a lot of negative externalities that equilibrium cost is too high ever to be ideal, and the equilibrium quantity is excessively low.

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