Question

If the production of oranges reduces global warming, then the equilibrium quantity of oranges will be_________the socially optimal quantity. A. higher than B. lower than C. equal to D. more valuable than

Answer 1

Answer:

B. lower than

Explanation:

As orange has a positive externality which cannot be included in the cost, the social optimal will be lower. That's because, neither the consumer will pay to benefit the entire society a higher price than their marginal utility or the producer produce when marginal cost exceed the marginal revenue

The government should try to subsidize the market to allow for a hiher quantity of organge an achieve the socially optinal quantity.