Which of the following statements is TRUE? I. In the face of a negative externality, a monopolistic market produces less than the socially optimal quantity of output. II. If public transport creates an external marginal benefit, the marginal social benefit of public transport services will always exceed their private marginal benefit. III. In unregulated markets, positive externalities create deadweight losses, but negative externalities do not. IV. In the face of a positive externality, a perfectly competitive market produces more than the socially optimal quantity of output. II and IV are correct II only is correct I and III are correct I and IV are correct
Economics
Which of the following statements is TRUE?
I. In the face of a negative externality, a monopolistic market produces less than the socially optimal quantity of output.
II. If public transport creates an external marginal benefit, the marginal social benefit of public transport services will always exceed their private marginal benefit.
III. In unregulated markets, positive externalities create
IV. In the face of a positive externality, a
- II and IV are correct
- II only is correct
- I and III are correct
- I and IV are correct
Ensure that you provide an appropriate rationale for the answer provided included marking use of appropriate diagrams where possible.
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