When a firm generates external benefits, a more efficient outcome would result if
A) the firm produced a larger output level.
B) the firm reduced its output level.
C) a tax were levied on the firm equal to the dollar amount of the externalities.
D) price were fixed below the firm's per-unit cost.

Question

Quizplus · Accepted Answer

When a firm generates external benefits, it means that its activities have positive effects on third parties. Producing a larger output level would increase these benefits, leading to a more efficient allocation of resources.

When a Firm Generates External Benefits, a More Efficient Outcome