Private markets fail to reach a socially optimal equilibriumwhen external benefits are present because the:
A)social value exceeds the private value at the private market solution.
B)private cost exceeds the social benefit at the private market solution.
C)private benefit equals the social benefit at the private market solution.
D)None of the answers is correct.Private markets DO achieve a socially optimal equilibrium when external benefits are
Present.

Question

Quizplus · Accepted Answer

When external benefits are present, the social value of the good or service exceeds the private value, which means that there are benefits to society as a whole that are not reflected in the individual's decision making at the private market level. As a result, the private market fails to reach a socially optimal equilibrium.

Private Markets Fail to Reach a Socially Optimal Equilibriumwhen External