When Positive Externalities Are Present, It Leads to an Underallocation

question 113

True/False

When positive externalities are present, it leads to an underallocation of resources in that area relative to that which is socially desirable.

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Definitions:

Marginal Cost

The cost associated with the production of an additional unit of a product or service.

Maximizing Profit

The process of adjusting inputs and outputs to achieve the highest possible return from business activities.

Identical Firms

Companies in a market that offer products or services that are exactly the same in terms of quality, performance, and price.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the total output.