If there is a marginal external benefit in a market, then which of the following
ID: 1206391 • Letter: I
Question
If there is a marginal external benefit in a market, then which of the following is correct? Circle or identify all that apply.
a. There is too little of a good thing.
b. Consumers or produces underestimate the benefit of their activity.
c. Government must produce the good in order to have market efficiency.
d. A law requiring consumers to buy or consume a minimum quantity of this good or service could be appropriate.
e. The good or service should be taxed to generate revenue for government.
Explanation / Answer
a. There is too little of a good thing.
b. Consumers or produces underestimate the benefit of their activity.
d. A law requiring consumers to buy or consume a minimum quantity of this good or service could be appropriate.
Since , the benefit of therree production is recieved by someone else, they will underestimate the benefit by considering just private benefit.