If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,
A)More than the efficient amount is being produced
B)Less than the efficient amount is being produced
C)the efficient amount is being produced
D)We do not know whether the efficient amount, or more or less, is being produced.

Question

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,
A)​More than the efficient amount is being produced
B)​Less than the efficient amount is being produced
C)​the efficient amount is being produced
D)​We do not know whether the efficient amount, or more or less, is being produced.

Quizplus · Accepted Answer

When the external benefits of a good exceed its external costs, the social value of the good is higher than the private value. This discrepancy leads to underproduction from a societal perspective, as the market does not account for the additional benefits, resulting in less than the efficient amount being produced.

If There Are Both External Benefits and External Costs Associated