When a positive externality is internalized in a market,total surplus:
A)increases more than the increase in consumer surplus.
B)decreases less than the increase in consumer surplus.
C)increases less than the decrease to producer surplus.
D)decreases more than the decrease to producer surplus.

Question

Quizplus · Accepted Answer

Internalizing a positive externality means that the benefit that was previously enjoyed by third parties is included in the decision-making of the buyers and sellers in the market. This results in an increase in both consumer and producer surplus, but since the total surplus is the sum of both, it increases more than the increase in consumer surplus alone. Therefore, choice A is the correct answer. The other choices do not accurately reflect the impact of internalizing a positive externality on total surplus.

When a Positive Externality Is Internalized in a Market,total Surplus