In the presence of positive externalities, a free market will choose a price which is too ____ and produce an output which is too ____ compared with the social optimum.
a. high; low
b. low; low
c. high; high
d. low; high
e. marginal; inequitable
Question 2
The government would use production taxes to remedy the problem of substantial:
a. internal benefits of production.
b. external benefits of production.
c. external costs of production.
d. external benefits of consumption
e. external costs of consumption.
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