A positive externality generates
A) a social cost curve that is above the supply curve (private cost curve) for a good.
B) a benefit to suppliers that is greater than the value of producer surplus
C) a social value curve that is above the demand curve (private value curve) for a good.
D) a social value curve that is below the demand curve (private value curve) for a good.

Question

Quizplus · Accepted Answer

A positive externality occurs when the production or consumption of a good or service generates benefits to a third party that are not reflected in the market price. This means that the social value (which includes both private and external benefits) of the good is higher than the private value (which only includes private benefits). Therefore, the social value curve will be above the demand curve (which represents the private value), as there are additional benefits that are not accounted for in the market price.

A Positive Externality Generates