In a free-market economy, a product that entails a positive externality (additional social benefit) will be rev: 04_09_2018 multiple choice overproduced.

1. underproduced.
2. produced at the optimal level.
3. provided solely by the government

The answer is : 1. underproduced.

Explanation:

Products with positive externality are products whose consumption will benefit not only the consumer but the third-party/the whole society as a whole (e.g: education, healthcare)

The problems with positive externality is the third-parties who benefit from the product consumption do not pay for the product; thus, the product's suppliers can not priced-in all the product benefits.

As a result, supplies usually produced less than the optimal level leading the products entailing positive externality underproduced.

So, 1. underproduced is the correct choice.

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