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

Question

Quizplus · Accepted Answer

A positive externality occurs when the production of a good or service benefits a third party who is not directly involved in the transaction. In this case, the social value is greater than the private benefit, and the social value curve is above the demand curve. This is because the value to society takes into account both the private benefit and the external benefits received by third parties. As a result, the optimal level of production is higher than the level that would be chosen based solely on the private benefit.

When the Production of a Good Results in a Positive