An external benefit in a market will cause the market to produce:
A) more than the same market would produce in the presence of a negative externality.
B) more than is socially desirable.
C) less than is socially desirable.
D) the socially optimal equilibrium amount.

Question

Quizplus · Accepted Answer

An external benefit means that the market produces less than is socially desirable because the positive effects on third parties are not considered in the market transactions, leading to underproduction.

An External Benefit in a Market Will Cause the Market