If external benefits are taken into account in the market
A) the demand curve would shift to the left.
B) the supply curve would shift to the left.
C) the demand curve would shift to the right.
D) the supply curve would become vertical.

Question

Quizplus · Accepted Answer

External benefits are positive effects that are not taken into account by the main parties involved in a transaction. These benefits create social value, which is not reflected in the market price. When external benefits are considered, the demand for the good or service will increase, since the social benefits are not reflected in the price. Thus, the demand curve would shift to the right.

If External Benefits Are Taken into Account in the Market