When external benefits are present,
A) property rights have already been established.
B) competitive markets are efficient.
C) competitive markets are inefficient.
D) a tax is required to eliminate the inefficiency.

Question

Quizplus · Accepted Answer

When external benefits are present, competitive markets tend to be inefficient because the market price and quantity do not reflect the full social benefits of a good or service, leading to underproduction or underconsumption from a societal perspective.

When External Benefits Are Present