Consider a market with a positive externality.The market will tend to ________ the good because the market participants tend to ignore the ________ of their decision.

Question

Quizplus · Accepted Answer

In the presence of a positive externality, the market tends to underproduce the good because the benefits to third parties (external benefits) are not taken into account by the producers or consumers of the good. This leads to a lower production level than what would be socially optimal.

Consider a Market with a Positive Externality