If Positive Externalities Are Present in the Production of a Good

question 88

Multiple Choice

If positive externalities are present in the production of a good, then society will:

• A)produce too much of the good since the marginal private benefit to consumers is less than the marginal social benefit.
• B)produce too little of the good since the marginal private benefit to consumers is greater than the marginal social benefit.
• C)produce too much of the good since the marginal private benefit to consumers is greater than the marginal social benefit.
• D)produce too little of the good since the marginal private benefit to consumers is less than the marginal social benefit.
• E)always produce the efficient quantity of output.

---

Definitions:

Current Price

The present market value or selling price of a good, service, or asset.

Product

An item or service created as a result of a process, intended for the market.

Absorption Costing

A financial tracking approach that incorporates all costs associated with producing an item, such as direct materials, direct labor, along with all manufacturing overhead costs, whether they are fixed or variable.

Markup Percentage

The percentage added to the cost of goods to achieve a selling price, representing profit margin.