Which of the following statements is (are) TRUE?
I. In the face of a positive externality, a perfectly competitive market produces less than the socially optimal quantity of output.
II. If vaccinations generate an external marginal benefit, their marginal social benefit will always exceed their private marginal benefit.
III. In unregulated markets, the presence of negative externalities-but not positive externalities-causes deadweight losses.
A) I and II
B) I, II, and III
C) III
D) I and III

Question

Quizplus · Accepted Answer

I. True, because positive externalities (like education or vaccinations) lead to benefits for others not accounted for by the private market, resulting in underproduction from a social perspective. II. True, because the external marginal benefit (e.g., herd immunity from vaccinations) adds to the private marginal benefit, making the marginal social benefit higher. III. False, both positive and negative externalities can cause deadweight losses; positive externalities result in underproduction, while negative externalities (like pollution) lead to overproduction relative to the social optimum.

Which of the Following Statements Is (Are) TRUE