Products that create external benefits are:
A) overconsumed because the private benefits exceed the private costs.
B) underconsumed because consumers only consider the private benefits of consumption.
C) neither overconsumed nor underconsumed because the marginal benefits equal the marginal costs.
D) underconsumed because the social costs exceed the social benefits.

Question

Quizplus · Accepted Answer

Products that create external benefits are underconsumed because consumers typically consider only their private benefits, not the additional social benefits, leading to less consumption than is socially optimal.

Products That Create External Benefits Are