Economists Say That When an Activity Provides a Positive Externality

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The Answer is Consumption of a good provides benefit to the individuals who are actually consuming the good.This benefit received by the consumers is measured by the market price paid for the good and is represented by the market demand curve.But if consuming that good provides additional benefit to people who are not paying the market price to consume it, we say that there is an external benefit above and beyond the market price.This marginal social benefit lies above the market demand curve, and since the market does not account for this external benefit, the market does not produce enough of that good.In other words, the market does not produce enough of a good that provides a positive externality.

Economists Say That When an Activity Provides a Positive Externality

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Economists Say That When an Activity Provides a Positive Externality

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Correct Answer:
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