If there are significant external benefits associated with the production or consumption of a good or service, there will be an under-allocation of resources to its production unless some corrective action is taken.

Question

Quizplus · Accepted Answer

This statement reflects the concept of a positive externality, where the social benefit of a good or service exceeds the private benefit received by producers and consumers. In such cases, the market may fail to allocate resources efficiently, resulting in an underproduction or underconsumption of the good unless the government intervenes to provide incentives or subsidies to address the externality.

If There Are Significant External Benefits Associated with the Production