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Is there are external benefits associated with the consumption of a good or service?

Definition – An external benefit occurs when producing or consuming a good causes a benefit to a third party. The existence of external benefits (positive externalities) means that social benefit will be greater than private benefit.

What does economic theory suggest if some activity creates external benefits as well as private benefits?

Question: If Some Activity Creates External Benefits As Well As Private Benefits, Then Economic Theory Suggests That The Activity Ought To Be Multiple Choice Taxed Prohibited Subsidized Left Alone If A Good That Generates Negative Externalities Were Priced To Take These Negative Externalities Into Account.

When producing a good generates external costs the private market for that good tends to produce too?

When producing a good generates external costs, the private market for that good tends to produce too: much of the product at too low a price.

Which of the following is an example of external benefit?

Many, if not most transactions create external benefits – examples include: Taking a bus reduces congestion on a road, enabling other road users to travel more quickly. Buying a burglar alarm may deter possible burglars from a street or an area, which provides a benefit to other home owners.

What is an example of an external cost quizlet?

Which is an example of an external cost? a cost paid by the consumer or the producer trading in the market. Only $2.99/month. Two parties fail to solve an externality problem because reaching an agreement requires high-priced lawyers to negotiate and write up contracts.

Why do governments regulate monopolies?

Competitive firms sell at market prices, which maximizes both consumer surplus and total surplus. Hence, governments regulate monopolies with the objective of benefiting societies more than would be the case if the monopolies maximized their profits. …