Which of the following will hold true when property rights are not well defined or are not appropriately assigned?
A)Goods that generate external costs will be overproduced.
B)Goods that generate external costs will be underproduced.
C)Goods that generate external benefits will be overproduced.
D)Goods that generate external benefits will be produced only by the government.

Question

Quizplus · Accepted Answer

When property rights are not well defined or appropriately assigned, there is a tendency for goods that generate external costs to be overproduced. This is because the producers do not bear the full cost of production, leading to overproduction relative to the socially optimal level.

Which of the Following Will Hold True When Property Rights