If the consumption of a good yields external benefits,then

Question

Quizplus · Accepted Answer

When the consumption of a good yields external benefits, it means that the good not only benefits the consumer but also benefits others in society. This leads to an underestimation of the true value of the good in the market demand, as the external benefits are not reflected in the price. Therefore, the social demand (which includes the external benefits) is greater than the market demand, and the optimal level of output is higher than what the market would naturally produce.

If the Consumption of a Good Yields External Benefits,then