If a product has an external benefit, how does its marginal private benefit compare to its marginal social benefit?
A) Marginal private benefit is greater than marginal social benefit.
B) At low quantities, marginal private benefit is less than marginal social benefit, but at high quantities marginal private benefit is greater than marginal social benefit.
C) At low quantities, marginal private benefit is greater than marginal social benefit, but at high quantities marginal private benefit is less than marginal social benefit.
D) Marginal private benefit cannot be compared to marginal social benefit.
E) Marginal private benefit is less than marginal social benefit.

Question

Quizplus · Accepted Answer

If a product has an external benefit, it means that there are positive impacts or benefits to people other than the person consuming or producing the product. This means that the marginal social benefit is higher than the marginal private benefit, as there are additional benefits to society as a whole. Therefore, the correct answer is E, where the marginal private benefit is less than the marginal social benefit.

If a Product Has an External Benefit, How Does Its