If the production of oranges generates an external benefit, then we would expect the market equilibrium quantity of oranges to be:
A)equal to the socially optimal quantity.
B)less than the socially optimal quantity.
C)greater than the socially optimal quantity.
D)equal to the socially optimal quantity plus the external benefit.

Question

Quizplus · Accepted Answer

If either the production or consumption of a good generates an external benefit, then the social benefit the good will be greater than the private benefit, implying that the market equilibrium quantity will be less than the socially optimal quantity.

If the Production of Oranges Generates an External Benefit, Then