FIGURE 16- 1
-Consider a product (say,tulip bulbs)that generates positive externalities when it is consumed (other people enjoy looking at them).In this case,

Question

FIGURE 16- 1 
-Consider a product (say,tulip bulbs)that generates positive externalities when it is consumed (other people enjoy looking at them).In this case,

Quizplus · Accepted Answer

Firms will only consider their private costs and benefits when making production decisions, and therefore, they will not take into account the positive externalities that their product generates. As a result, they will produce less than the socially optimal amount unless they internalize the external benefits.