1. Show that when external benefits are involved, market outputs and prices tend to be too...

 

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1. Show that when external benefits are involved, market outputs and prices tend to be too low relative to the socially efficient levels. Use a suitable fully-labelled graph to explain your answer. How would your answer change if external costs were involved instead of external benefits? [10 marks]. 1. Show that when external benefits are involved, market outputs and prices tend to be too low relative to the socially efficient levels. Use a suitable fully-labelled graph to explain your answer. How would your answer change if external costs were involved instead of external benefits? [10 marks].

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