When a positive externality is present in a market,the quantity consumed:
A)is less than the socially optimal quantity.
B)is always more than the socially optimal quantity.
C)is the same as the socially optimal quantity.
D)is often more than the socially optimal quantity.

Question

Quizplus · Accepted Answer

When a positive externality is present, the social benefit is greater than the private benefit. This means that the demand curve (which represents private benefit) lies below the social benefit curve. As a result, the market equilibrium is at a lower quantity than the socially optimal level of output. Therefore, the quantity consumed is less than the socially optimal quantity.

When a Positive Externality Is Present in a Market,the Quantity