Respuesta :
When there is a positive externality in a free market, too much of the good is produced and consumed. This statement is false.
Positive externalities happen when the usage of a good or its production results in a benefit to a third party.
For instance, you receive a private advantage when you consume education. However, there are advantages for the rest of society as well.
For instance, you can educate others, and as a result, they gain from your education. (A positive externality of consumption)
Positive externalities cause market failure and underconsumption.
Among the government initiatives to boost demand for items with favorable externalities
- Regulations and guidelines - minimum school age
- In order to boost the stock of high-quality housing, the government is creating more council housing.
- Price-lowering and consumption-encouraging subsidies, such as those provided by the government for rural train services.
Hence, the given statement is false.
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