When externalities are present in a market, social surplus is maximized.

Name: When externalities are present in a market, social surplus is maximized.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Externalities can result in a divergence between private and social costs or benefits. This means that the market may not achieve the socially optimal level of production and consumption, leading to a loss of social surplus. Therefore, the presence of externalities typically does not result in the maximization of social surplus.

When Externalities Are Present in a Market, Social Surplus Is