Question

If there are external or spillover benefits associated with consumption and production of a product, it can be said that the:

Answer 1

supply curve for the product lies too far to the right to provide an efficient allocation of resources

Step-by-step explanation:

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A good has positive externality if the benefits to third parties not involved in production is greater than the cost. an example of an activity that generates positive externality is research and development. Due to the high cost of R & D, they are usually under-produced. Government can encourage the production of activities that generate positive externality by granting subsidies.

Goods that generate spill over benefits are usually underproduced and the supply curve lies too far to the right to provide an efficient allocation of resources