For a product with external benefits that is produced in a competitive,unregulated market,how can the resulting market output be described?
A) underproduction compared to the efficient level
B) overproduction compared to the efficient level
C) production equals the efficient level
D) underproduction or overproduction are both possible depending on whether the external benefit is to consumption or production
E) None of the above is correct.

Question

Quizplus · Accepted Answer

In a competitive, unregulated market, firms only take into account the private costs and benefits of production. Therefore, with external benefits, the social benefit is greater than the private benefit, resulting in underproduction compared to the efficient level.

For a Product with External Benefits That Is Produced in a Competitive,unregulated