If a good that generates positive externalities were produced and priced to take into account these spillover benefits,then its:
A) price and output would increase.
B) output would increase,but price would remain constant.
C) price would increase and output would decrease.
D) price would increase,but output would remain constant.

Question

Quizplus · Accepted Answer

When a good generates positive externalities, the social benefit of consuming the good exceeds the private benefit. If the good is priced to take into account these spillover benefits, the price will increase to reflect the higher social benefit. As a result, consumers will demand more of the good at the higher price, leading to an increase in output. Therefore, both price and output would increase.

If a Good That Generates Positive Externalities Were Produced and Priced