Consider a Product (Say,tulip Bulbs)that Generates Positive Externalities When It

question 46

Multiple Choice

Consider a product (say,tulip bulbs) that generates positive externalities when it is consumed (other people enjoy looking at them) .In this case,

• A)the government could tax the production of this good to improve efficiency.
• B)at market equilibrium,the marginal social benefit is less than the marginal cost of producing the last unit.
• C)at the market equilibrium,the output would be greater than the socially optimal amount.
• D)too few tulips will be produced and consumed unless external benefits are internalized.
• E)at the market equilibrium,the price is too high to be allocatively efficient.

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