Consider two goods--one that generates external costs and another that generates external benefits. The actual market outcome would
A) result in output that is lower than the efficient output for both goods.
B) result in output that is higher than the efficient output for both goods.
C) result in output that is lower than the efficient output for the good with an external benefit and output that is higher than the efficient output for the good with an external cost.
D) result in output that is higher than the efficient output for the good with an external benefit and output that is lower than the efficient output for the good with an external cost.

Question

Quizplus · Accepted Answer

Goods with external benefits are underproduced, and goods with external costs are overproduced in the market without intervention.

Consider Two Goods--One That Generates External Costs and Another That