When consumption of a good generates a positive externality, which of the following must be true at the market equilibrium?

A. Marginal social benefit is less than marginal private cost. B. Marginal social benefit is greater than marginal private benefit. C. Marginal social cost is greater than marginal social benefit. D. Marginal social cost is less than marginal private benefit.

Question

Dax Lawson

Business

6 June, 03:43

When consumption of a good generates a positive externality, which of the following must be true at the market equilibrium?

A. Marginal social benefit is less than marginal private cost. B. Marginal social benefit is greater than marginal private benefit. C. Marginal social cost is greater than marginal social benefit. D. Marginal social cost is less than marginal private benefit.

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Answers (1)

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Katie Wolf · Answer 1

B. Marginal social benefit is greater than marginal private benefit.

Explanation:

When consumption of a good generates a positive externality, the statement is true at the market equilibrium is marginal social benefit is greater than marginal private benefit. As we hold a perception of this permanence concerning some positive externality signifies that marginal social benefit remains higher aside from marginal private benefit. Ended consuming simply quantity Q, marginal social benefit is a higher marginal social cost, including higher of the good, should be absorbed.