Question

In a free market system, what can result if profit incentives do not work properly in the face of spillover costs?

Answer 1

spillover costs can affect prices

Answer 2

The equilibrium will be destroyed by this event. When there is a high demand and lack of supply, shortage will occur. When there is a low demand and high supply, there will be a surplus. There must be an equilibrium in order for the profit incentives to be worth the change.