In a market characterized by external benefits,the market equilibrium is not socially optimal.

Question

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In a market with external benefits, there are benefits that accrue to individuals or groups beyond the buyers and sellers in the market. Since the market only considers the private benefits and costs, the market equilibrium fails to consider the external benefits to society. Therefore, the market equilibrium is not socially optimal.

In a Market Characterized by External Benefits,the Market Equilibrium Is