Private markets fail to reach a socially optimal equilibrium when positive externalities are present because the
A)private benefit equals the social benefit at the private market solution.
B)private cost exceeds the private benefit at the private market solution.
C)social value exceeds the private value at the private market solution.
D)private cost exceeds the social benefit at the private market solution.

Question

Quizplus · Accepted Answer

Positive externalities result in a situation where the social value (benefit to society) is greater than the private value (benefit to individuals), leading to underproduction in private markets compared to the socially optimal level.

Private Markets Fail to Reach a Socially Optimal Equilibrium When