When the production of a good results in a positive externality, the social value curve is
A)below the demand curve, indicating that the total value to society is less than the private benefit.
B)above the demand curve, indicating that the total value to society is greater than the private benefit.
C)identical to the demand curve, indicating that the total cost to society is the equal to the private benefit.
D)above the supply curve, indicating that the total cost to society exceeds the private cost.

Question

Quizplus · Accepted Answer

When the production of a good results in a positive externality, the social value curve will be above the demand curve, indicating that the total value to society is greater than the private benefit. This is because the positive externality creates additional benefits to society that are not reflected in the private benefit received by the individual consumer or producer. Therefore, the social value curve measures the total value of the good to society, including the positive externality.

When the Production of a Good Results in a Positive