Final answer:
The market tends to overproduce, not underproduce, goods connected with a negative externality, like pollution, because not all social costs are reflected in the market price, leading to market failure. The statement n the question is false.
Step-by-step explanation:
When a negative externality, such as pollution, exists in the market, the market tends to overproduce the good connected with the negative externality, not underproduce it. This overproduction occurs because the supply curve no longer accounts for all social costs associated with the production of the good. This leads to market failure, where private costs are not aligned with the social costs, causing more of the product to be produced and consumed than would be the case if the external costs were included in the market price. Hence, the true statement is that the market overproduces the good.