True or False: In a market characterized by significant externalities, the socially optimal output level is always lower than the competitive output level due to the presence of negative externalities.

The statement is generally true because significant negative externalities can lead to overproduction in a competitive market. Negative externalities occur when the actions of producers or consumers impose costs on others who are not involved in the transaction, like pollution from a factory. In a competitive market, producers focus on their profits and may produce more than what is socially desirable, ignoring the harm caused to the environment or public health. For example, if a factory emits harmful smoke, it might produce more goods than is best for society, leading to a higher competitive output level than the socially optimal level. Therefore, to reach the socially optimal output, which considers the well-being of the whole community, production would need to be reduced to account for these external costs.