Econ Assignment Question?

[Lebanese_Mafia]

If the consumption of a good generates external benefits for society as a whole, then:

A. At the free market output, the social value is greater than the cost

B. The government can subsidize consumption of the good and increase efficiency

C. The free market output is inefficient

D. All these answers are correct

[Hubris252]

It could be either A or C, more likely C. If a good generates externl benefits then at the free-market equilibrium marginal social benefit is greater than marginal private cost. Since answer A is not that specific, answer C is the most correct answer.