Asked by Hardi Patel on Jun 03, 2024
Verified
External benefits are associated with the production of batteries.Without government regulation,the market will:
A) produce too many batteries.
B) price batteries at less than the marginal social cost.
C) price batteries at less than the marginal social benefit.
D) price batteries above the marginal social cost.
External Benefits
Benefits of a good or service that are enjoyed by people other than the ones who originally purchase or consume the good.
Marginal Social Cost
The complete expense incurred by society to produce an extra unit of a product, incorporating both individual costs and external effects.
Marginal Social Benefit
The additional benefit to society as a whole from producing one extra unit of a good or service.
- Understand external benefits in the context of environmental economics and the impact on market outcomes without regulation.
Verified Answer
HB
Hannah BeatrixJun 08, 2024
Final Answer :
C
Explanation :
When external benefits are present, the market tends to produce less of the good than is socially optimal because it does not account for the additional benefits to society. This results in a price that is lower than the marginal social benefit, indicating that more of the good should be produced to maximize societal welfare.
Learning Objectives
- Understand external benefits in the context of environmental economics and the impact on market outcomes without regulation.