If a good has a social benefit greater than the private benefit at the market equilibrium, what is the implication about its production?

When a good has a social benefit that exceeds the private benefit at market equilibrium, it indicates that the overall advantage to society from producing and consuming that good is greater than what individuals receive from it. This situation typically arises in the context of positive externalities, where the benefits of a good extend beyond the immediate consumers and producers to society as a whole.

Encouraging the production of such goods is essential because the market, operating solely on private benefits, may underproduce them compared to the socially optimal level. By recognizing the greater social benefit, policymakers or market forces should work towards increasing production to enhance overall welfare. This can be achieved through subsidies, public provision, or other interventions that help to align private incentives with social benefits.

Therefore, the implication that production should be encouraged reflects the need to address this disparity and ensure that the good is produced in quantities that maximize social well-being.