If a private good generates external benefits
A) the social benefit will be greater than the private benefit.
B) the social benefit will equal the private benefit.
C) the social benefit will equal the private benefit minus the external benefit.
D) the external benefit will equal the private benefit plus the social benefit.

Question

Quizplus · Accepted Answer

When a private good generates external benefits, it means that there are additional benefits that are enjoyed by individuals or society as a whole that are not reflected in the private benefit received by the person consuming the good. This means that the social benefit (private benefit plus external benefit) will be greater than the private benefit alone. Therefore, choice A is the correct answer.

If a Private Good Generates External Benefits