When Products That Create Positive Externalities Are Produced, at the Market

question 24

True/False

When products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.

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Definitions:

Average Fixed Costs

The total fixed costs of production divided by the quantity of output produced, illustrating how fixed costs dilute as production increases.

Average Total Costs

The total cost of production divided by the number of units produced, reflecting the average cost per unit.

Total Variable Cost

The total of all costs that vary with output level, including materials, labor, and other expenses that increase as production increases.

Implicit Costs

The opportunity costs of using resources owned by the firm for its own use, rather than earning income from these resources elsewhere.