Why does the existence of an external benefit lead to the production of less than the efficient quantity?
What will be an ideal response?
Buyers ignore the presence of an external benefit because the benefit they receive is the private benefit. As a result, buyers do not take account of all the benefits from a good or service. Because buyers do not take account of all the benefits, their demand for the good or service, which reflects their private benefit, is less than the marginal social benefit, is less than the marginal social benefit. So, with the demand being less than the marginal social benefit, the equilibrium quantity is less than the efficient quantity.
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When does the Fed lend through discount windows?
What will be an ideal response?
A perfectly contestable market is one which a firm can enter and exit without losing its investment
a. True b. False Indicate whether the statement is true or false
If a market economy has a self-correcting mechanism, when output is lower than potential or full-employment output,
a. changes will occur that will automatically guide the economy back to full employment. b. resource prices will increase. c. prolonged unemployment such as was experienced during the Great Depression will occur. d. the economy will fall into a more severe recession.
A firm operating in a perfectly competitive industry will shut down in the short run but earn losses if the market price is less than that firm's average variable cost
a. True b. False Indicate whether the statement is true or false