Question

When the social returns from production are larger than the private returns from production A. Market output is below the social optimum. B. Market output is above the social optimum. C. Prices are too high. D. Prices are too low. E. A and C only. F. B and D only.

Answer 1

Answer: the answer is E that is A and C only

Explanation:

Market output is below the social returns and Prices are too high.

When significant external costs are associated with a good or services then the price of the good is tool low because external costs are not being paid and its output level is too high relative to the socially efficient supply ad demand for example as the price of goods goes up, consumers demand less of it and more supplies enters the market.

marginal social rates of return and demonstrates the inadequacy of wage differentials ... leads to no reduction in output