If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are equal in magnitude to the external costs,
A)More than the efficient amount is being produced
B)Less than the efficient amount is being produced
C)the efficient amount is being produced
D)We do not know whether the efficient amount, or more or less, is being produced.

Question

If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are equal in magnitude to the external costs,
A)​More than the efficient amount is being produced
B)​Less than the efficient amount is being produced
C)​the efficient amount is being produced
D)​We do not know whether the efficient amount, or more or less, is being produced.

Quizplus · Accepted Answer

When external benefits and external costs are equal in magnitude, the efficient amount is being produced. This is because the net social benefit is zero, and producing any more or any less would create a negative net social benefit. Therefore, the efficient amount is being produced.

If There Are Both External Benefits and External Costs Associated