If the production of a product entails a positive externality, and the firm is not forced to consider the positive externality when deciding how much to produce, then the firm will produce

Question

Quizplus · Accepted Answer

When a positive externality is present, the social benefit of producing the product is greater than the private benefit received by the firm. Without being forced to consider this externality, the firm will produce less than the socially efficient level of output because it does not account for the additional benefits its production provides to society.

If the Production of a Product Entails a Positive Externality