When the consumption of a good creates an external benefit
A) the marginal social cost curve lies below the marginal private cost curve.
B) the marginal social benefit curve lies above the marginal private benefit curve.
C) the quantity produced in an unregulated, competitive market is greater than the efficient quantity.
D) an unregulated, competitive market will produce the efficient quantity of the good.

Question

Quizplus · Accepted Answer

When a good creates an external benefit, the marginal social benefit (MSB) is greater than the marginal private benefit (MPB), meaning the MSB curve lies above the MPB curve.

When the Consumption of a Good Creates an External Benefit