Consider Two Goods-One That Generates External Benefits and Another That

question 71

Multiple Choice

Consider two goods-one that generates external benefits and another that generates external costs. What would a competitive market economy tend to produce?

• A) too little of both goods, relative to the social optimum
• B) too much of the good that generates external benefits relative to the social optimum, and too little of the good that generates external costs
• C) too little of the good that generates external benefits relative to the social optimum, and too much of the good that generates external costs
• D) too much of both goods, relative to the social optimum

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