If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:...

If the market equilibrium quantity is greater than the socially optimal quantity, one can infer that:

Select one:

a. the private marginal benefits of the activity are less than the marginal social benefits.

b. the production of this good has a positive externality.

c. the production of this good has a negative externality.

d. the private marginal costs for the activity are greater than the marginal social costs of the activity.

Expert Solution

When the market equilibrium is greater than the socially optimal quantity, then the market is overproducing which is the case with goods associated with a negative externality or goods which have an adverse effect such as when a factory is polluting the air.

-the production of this good has a negative externality

option(C)

Rahul Sunny answered 3 years ago

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