When there is a positive externality associated with the watering of one's lawn, the free market results in:
A) not enough lawn watering.
B) too much lawn watering.
C) the socially optimal level of lawn watering.
D) people watering each other's lawns.

Question

Quizplus · Accepted Answer

When there is a positive externality, such as the increased beauty and environmental benefits from watering one's lawn that others enjoy, the free market tends to produce less of the activity than is socially optimal because individuals do not consider the external benefits their actions provide to others.

When There Is a Positive Externality Associated with the Watering