Without government intervention,society is likely to get too little production of:
i.private goods that generate external costs
ii.private goods that generate external benefits
iii.public goods
A) (i) only
B) (ii) only
C) (iii) only
D) both (ii) and (iii)

Question

Quizplus · Accepted Answer

Society is likely to get too little production of both private goods that generate external benefits and public goods without government intervention because private producers do not consider the positive externalities of their actions while deciding on their level of production. In the case of private goods that generate external costs, there may be too much production without government intervention because producers do not consider the negative externalities of their actions while deciding on their level of production. However, none of the options include (i) and (iii), making (D) the best choice.

Without Government Intervention,society Is Likely to Get Too Little Production