Question

Suppose apple trees generate a positive externality in production. If​ so, then

A.the private market equilibrium results in a quantity that is greater than the efficient quantity.
B.the private market equilibrium results in a quantity that is less than the efficient quantity.
C.the private market equilibrium results in a price that is equal to the efficient price.
D.the private market equilibrium results in a quantity of zero.
E.the private market equilibrium results in a quantity that is greater than the equilibrium price.

Answer 1

In a market with positive externality in production, the private market equilibrium results in a quantity that is less than the efficient quantity.

Step-by-step explanation:

In a market with positive externality in production, the private market equilibrium results in a quantity that is less than the efficient quantity. This means that the private market is not producing enough of the good or service to maximize societal welfare.

For example, if apple trees generate positive externalities, such as providing shade and improving air quality, the private market may not take these benefits into account when determining the quantity to produce.

As a result, the private market equilibrium quantity is lower than what would be considered efficient for society.