If the consumption of bananas is at a less than socially optimal level, we can say that:
A)consumption of bananas creates a positive consumption externality
B)production of bananas creates a negative consumption externality
C)consumption of bananas creates a negative production externality
D)production of bananas creates a neutral production externality

Question

Quizplus · Accepted Answer

If the consumption of bananas is at a less than socially optimal level, it indicates that the marginal benefit to consumers from consuming one more banana is greater than the marginal cost of producing it. This implies that the social benefit of consuming bananas is greater than the private benefit, which in turn suggests that consuming bananas creates positive consumption externality.

If the Consumption of Bananas Is at a Less Than