In a market with negative externalities, how does the quantity supplied relate to the social optimal level?

In the context of negative externalities, the quantity supplied in a market typically exceeds the socially optimal level. This occurs because producers often do not account for the external costs their production imposes on society, such as pollution or health impacts. As a result, they tend to produce more than what would be considered socially optimal, which is the level of production that takes into account the welfare of all affected parties, including those not directly involved in the transaction.

When negative externalities are present, the private cost of production is less than the social cost, leading to overproduction in the market. This overproduction results in a quantity that is larger than the social optimum, where the latter reflects the equilibrium level of production that includes all external costs. Therefore, the correct answer indicates that the market quantity supplied is larger than the socially optimal level due to the failure to include these external costs in the supply decision.