In the presence of significant externalities, a market equilibrium maximizes:
A) social surplus.
B) nothing.
C) consumer surplus plus producer surplus plus everybody else's surplus.
D) consumer surplus plus producer surplus.

Question

Quizplus · Accepted Answer

In the presence of significant externalities, a market equilibrium does not maximize social surplus because externalities cause a divergence between private and social costs or benefits, leading to market failure.

In the Presence of Significant Externalities, a Market Equilibrium Maximizes