When the marginal social benefit of Good A is greater than the marginal private benefit of Good A, then
A) competitive, unregulated markets will produce a quantity of Good A that is less than the efficient quantity.
B) competitive, unregulated markets will produce the quantity of Good A that is equal to the efficient quantity.
C) competitive, unregulated markets will produce a quantity of Good A that is greater than the efficient quantity.
D) the government should levy a tax on the production of Good A that is equal to the horizontal distance between the two marginal cost curves.

Question

Quizplus · Accepted Answer

When the marginal social benefit is greater than the marginal private benefit, it indicates a positive externality. In such cases, competitive markets tend to underproduce the good relative to the socially optimal level.

When the Marginal Social Benefit of Good a Is Greater