In a free-market economy, a product that entails a positive externality (additional social benefit) will be rev: 04_09_2018 Multiple Choice overproduced.

1. underproduced.

2. produced at the optimal level.

3. provided solely by the government

Question

Rosa Weeks

Business

19 November, 20:38

In a free-market economy, a product that entails a positive externality (additional social benefit) will be rev: 04_09_2018 Multiple Choice overproduced.

1. underproduced.

2. produced at the optimal level.

3. provided solely by the government

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Answers (1)

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Volvo · Answer 1

The answer is : 1. underproduced.

Explanation:

Products with positive externality are products whose consumption will benefit not only the consumer but the third-party/the whole society as a whole (e. g: education, healthcare)

The problems with positive externality is the third-parties who benefit from the product consumption do not pay for the product; thus, the product's suppliers can not priced-in all the product benefits.

As a result, supplies usually produced less than the optimal level leading the products entailing positive externality underproduced.

So, 1. underproduced is the correct choice.

In a free-market economy, a product that entails a positive externality (additional social benefit) will be rev: 04_09_2018 Multiple Choice overproduced.1. underproduced.2. produced at the optimal level.3. provided solely by the government

In a free-market economy, a product that entails a positive externality (additional social benefit) will be rev: 04_09_2018 Multiple Choice overproduced.

1. underproduced.

2. produced at the optimal level.

3. provided solely by the government