Asked by

Mikayla Mapps
on Dec 11, 2024

verifed

Verified

Consider two goods--one that generates external benefits and another that generates external costs. A competitive market economy would tend to produce

A) too much of both goods.
B) too little of both goods.
C) too much of the good that generates external benefits and too little of the good that generates external costs.
D) too little of the good that generates external benefits and too much of the good that generates external costs.

External Benefits

Benefits resulting from a transaction that affect parties not directly involved in the transaction, often leading to positive outcomes for society.

External Costs

Costs of a transaction or activity that affect third parties who did not choose to incur that cost, often seen in environmental pollution.

Competitive Market

A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product for which there are many substitutes.

  • Determine the role of external costs and benefits in affecting market efficiency.
  • Investigate the response of markets to external factors and its effect on optimum levels of output.
verifed

Verified Answer

MM
madan mohan guptaDec 17, 2024
Final Answer:
Get Full Answer