When the production of a good results in spillover benefits, the market system fails by producing ______ of it and ______ resources to its use.

Question

Quizplus · Accepted Answer

When a good has spillover benefits (positive externalities), the market tends to produce too little of it and under-allocate resources to its production because it does not account for the external benefits to third parties.

When the Production of a Good Results in Spillover Benefits