The Following Questions Refer to the graph below.
-Assume that the current market demand and supply curves for Z are D₁ and S₁ and there are positive social spillovers associated with the consumption of Z.Which curve could represent the MSB curve for Z?

Question

The Following Questions Refer to the graph below.

-Assume that the current market demand and supply curves for Z are D₁ and S₁ and there are positive social spillovers associated with the consumption of Z.Which curve could represent the MSB curve for Z?

Quizplus · Accepted Answer

The MSB (Marginal Social Benefit) curve for Z would be higher than the original demand curve due to positive social spillovers associated with the consumption of Z. This means the MSB curve would lie above the current market demand curve, D₁. Option B, D₂, represents a curve that could be above the original demand curve, making it a plausible representation of the MSB curve.

The Following Questions Refer to the Graph Below