When the free market produces less than the socially optimal quantity of a good,
A)negative externalities must be present
B)marginal social cost must exceed marginal private cost
C)marginal private benefit must exceed marginal social benefit
D)the government should tax production of the good
E)there has been a market failure

Question

Quizplus · Accepted Answer

When the free market produces less than the socially optimal quantity of a good, it indicates a market failure, as the market is not allocating resources efficiently to achieve the optimal level of production.

When the Free Market Produces Less Than the Socially Optimal