Graph 10-5
-Refer to Graph 10-5.Which of the graphs shown best depicts the case of a positive consumption externality?
A)panel (a)
B)panel (b)
C)panel (c)
D)panel (d)

Question

Graph 10-5 
-Refer to Graph 10-5.Which of the graphs shown best depicts the case of a positive consumption externality?
A)panel (a) 
B)panel (b) 
C)panel (c) 
D)panel (d)

Quizplus · Accepted Answer

Panel (b) shows a positive consumption externality, as the social value of the good is higher than the private value. This is indicated by the fact that the socially optimal quantity (Q*) is higher than the equilibrium quantity (Qe).

Graph 10-5 -Refer to Graph 10-5.Which of the Graphs Shown Best Depicts