When will firms produce an output level that is above the socially efficient level?
A)There are external costs of production equal to marginal benefits.
B)There are internal costs of production and firms do not have to account for them.
C)There are external costs of production and firms do not have to account for them.
D)There are external costs of production and firms have account for them.

Question

Quizplus · Accepted Answer

When there are external costs of production and firms do not have to account for them, they will produce an output level that is above the socially efficient level. This is because firms prioritize their own profits over society's welfare and do not consider the negative effects their production has on others. As a result, they will continue to produce goods even if the social cost of production is greater than the private cost of production.

When Will Firms Produce an Output Level That Is Above