When production of a good provides external benefits, there will be
A) too few resources devoted to its production.
B) too many resources devoted to its production.
C) the optimal amount of resources devoted to its production.
D) abnormally high profits earned by producers of the good.

Question

Quizplus · Accepted Answer

When production of a good provides external benefits, it means that the social benefits exceed the private benefits. As a result, the market tends to underproduce the good, leading to too few resources being devoted to its production compared to the socially optimal level.

When Production of a Good Provides External Benefits, There Will