Suppose that there are external benefits in an otherwise perfectly competitive market. The market will produce ______________ the allocatively efficient level of output.Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.amore thanbless thancan amount equal todeither an amount equal to or an amount more than
Question
Suppose that there are external benefits in an otherwise perfectly competitive market. The market will produce ______________ the allocatively efficient level of output.Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.amore thanbless thancan amount equal todeither an amount equal to or an amount more than
Solution
The correct answer is "less than".
In a perfectly competitive market, firms only consider their private costs and benefits when deciding how much to produce. They do not take into account the external benefits that their production may provide to others. As a result, the market will produce less than the allocatively efficient level of output, which would take into account both private and external benefits.
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