True or False: Positive externalities in production can lead to market failures because the benefits to third parties are not reflected in the price of the goods produced, thereby discouraging optimal levels of production.

The statement is true. Positive externalities in production happen when the production of goods creates benefits for people who are not directly involved in the transaction, like when a factory creates jobs and boosts the local economy. Because these benefits are not included in the price of the product, producers may not make enough of the good to meet the overall demand in society. For example, if a company invests in clean energy, it not only helps its own business but also reduces pollution for everyone, yet the company might not produce enough clean energy because it doesn't capture all the benefits. This can lead to a situation where the market fails to provide enough of the good, as the true value is not reflected in the price.