A positive production externality will cause a market to produce:
A)less than is socially desirable
B)more than is socially desirable
C)more than is market optimal
D)less than is market optimal

Question

Quizplus · Accepted Answer

A positive production externality means that the social benefits of production are higher than the private benefits. This leads to underproduction from a societal perspective, as the market does not account for the external benefits, thus producing less than is socially desirable.

A Positive Production Externality Will Cause a Market to Produce