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

question 117

Multiple Choice

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

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

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