In the Absence of Regulation, Which of the Following Is

Multiple Choice

In the absence of regulation, which of the following is true of a good or service that generates a positive externality?

A) The supply of the good will be less than the socially optimal level of output.
B) The firm captures the benefit from the positive externality in the form of increased profits.
C) The market price of the good will be equal to its marginal external cost.
D) The market price of the good will be less than the socially optimal price.
E) The firm will produce an output such that marginal total cost equals price.