When external benefits are present in a market,
A) less of the good will be produced than the amount consistent with economic efficiency.
B) more of the good will be produced than the amount consistent with economic efficiency.
C) the amount of the good produced will be equal to the amount consistent with economic efficiency.
D) corresponding external costs are always generated.

Question

Quizplus · Accepted Answer

When external benefits are present, the market tends to underproduce the good because the private market does not account for the additional benefits to society, leading to less production than is economically efficient.

When External Benefits Are Present in a Market