At the current market equilibrium level of output, the marginal private benefit of a good is less than its marginal social benefit. At the same time, the marginal private cost of producing the good is less than its marginal social cost.
As a result, there will definitely be:
positive externalities in production.
negative externalities in consumption.
a misallocation of resources.
productive efficiency in the market.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.