When competitive market equilibrium determines a level of output for which the marginal social cost exceeds the marginal social benefit, the private equilibrium results in
A)a positive externality
B)a Coase equilibrium
C)underproduction of the product
D)a market failure
E)external benefits

Question

Quizplus · Accepted Answer

When the marginal social cost exceeds the marginal social benefit, it means that too much of the product is being produced from the society's perspective. As a result, there is a market failure, implying that the private market is not allocating resources efficiently.

When Competitive Market Equilibrium Determines a Level of Output for Which