A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. As a result, rain barrels benefit the community through water conservation. If homeowners do not consider this external benefit of rain barrels, then
A)the socially optimal quantity of rain barrels will be larger than the equilibrium quantity of rain barrels.
B)the socially optimal quantity of rain barrels will be smaller than the equilibrium quantity of rain barrels.
C)the socially optimal price of rain barrels will be lower than the equilibrium price of rain barrels.
D)the market for rain barrels would benefit from a tax on rain barrels.

Question

​A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. As a result, rain barrels benefit the community through water conservation. If homeowners do not consider this external benefit of rain barrels, then
A)​the socially optimal quantity of rain barrels will be larger than the equilibrium quantity of rain barrels.
B)​the socially optimal quantity of rain barrels will be smaller than the equilibrium quantity of rain barrels.
C)​the socially optimal price of rain barrels will be lower than the equilibrium price of rain barrels.
D)the market for rain barrels would benefit from a tax on rain barrels.

Quizplus · Accepted Answer

When homeowners do not consider the external benefits of rain barrels, the market equilibrium quantity will be lower than the socially optimal quantity, as the positive externalities are not reflected in the market demand.

​A Rain Barrel Is a Container That Captures and Stores

A Rain Barrel Is a Container That Captures and Stores