In the Absence of Regulation, Which of the Following Is

question 33

Multiple Choice

In the absence of regulation, which of the following is true of a good or service that generates a positive externality?

• A) The supply of the good will be less than the socially optimal level of output.
• B) The firm captures the benefit from the positive externality in the form of increased profits.
• C) The market price of the good will be equal to its marginal external cost.
• D) The market price of the good will be less than the socially optimal price.
• E) The firm will produce an output such that marginal total cost equals price.

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