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Suppose that if production is smaller than 500, the marginal external benefit is greater than 0. However, for any quantity greater than 500, the marginal

Suppose that if production is smaller than 500, the marginal external benefit is greater than 0.

However, for any quantity greater than 500, the marginal external benefit is constant and equal to 0.

Then, if the interaction between buyers and sellers determines a quantity greater than 500, the allocation resulting from a competitive market will be Pareto efficient.

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