If left to market forces,activities that produce external benefits will be overproduced.

Question

Quizplus · Accepted Answer

If left to market forces, activities that produce external benefits will be underproduced because the market does not take into account the positive effects that the activity has on society as a whole. Hence, there is a market failure and a need for government intervention to ensure that the activity is produced at the socially optimal level.

If Left to Market Forces,activities That Produce External Benefits Will