Competitive markets _____ goods with negative externalities and _____ provide goods with positive externalities.

Question

Quizplus · Accepted Answer

Competitive markets tend to overprovide goods with negative externalities because they do not account for the external costs imposed on society. Conversely, they underprovide goods with positive externalities because they cannot capture the external benefits for the producer, leading to less production than is socially optimal.

Competitive Markets _____ Goods with Negative Externalities and _____ Provide

Competitive Markets _ Goods with Negative Externalities and _ Provide