If an activity results in a spillover benefit,then in a pure market economy the:
A) quantity produced is too low.
B) quantity produced is too high.
C) market supply is too low.
D) market supply is too high.

Question

Quizplus · Accepted Answer

In a pure market economy, producers only consider their own costs and benefits, not the external costs and benefits that may arise from their production. Spillover benefits are those that are enjoyed by individuals other than the original consumers or producers, so they are not taken into account in the market. As a result, the quantity produced will be lower than the socially optimal level, hence the quantity produced is too low.

If an Activity Results in a Spillover Benefit,then in a Pure