What will a positive externality cause a private market to produce
A)less than is socially desirable
B)more than is socially desirable
C)more than market equilibrium
D)less than market equilibrium

Question

Quizplus · Accepted Answer

A positive externality is a benefit received by a third party, which is not accounted for by the market. In this case, the market will only take into account the private benefits received by the producer and consumer. Therefore, the private market will only produce to maximize their own profits and will not account for the social benefits of their actions. As a result, the market will produce less than is socially desirable.

What Will a Positive Externality Cause a Private Market to Produce