Which of the following statements is false?
A)If a negative externality exists, the market output is greater than the socially optimal output.
B)If a positive externality exists, the market output is less than the socially optimal output.
C)If there are no external costs or benefits, then it follows that marginal private costs equal marginal social costs and marginal private benefits equal marginal social benefits.
D)When a positive externality exists, marginal social benefits are greater than marginal private benefits.
E)none of the above

Question

Quizplus · Accepted Answer

All statements A through D are true regarding externalities and their impact on market output and social optimality. Statement A describes the effect of a negative externality leading to overproduction, B describes underproduction in the case of a positive externality, C outlines the condition of no externalities where private and social costs and benefits align, and D correctly states that in the presence of a positive externality, the social benefits exceed private benefits.

Which of the Following Statements Is False