Question

When there is a positive​ externality, A. the private benefit received by consumers is greater than the external benefit. B. the social benefit received by consumers is greater than the private benefit. C. the private benefit received by consumers is greater than the social benefit. D. the private benefit received by consumers is greater than the private cost.

Answer 1

Answer:

The correct answer is the letter b. the social benefit received by consumers is greater than the private benefit.

Explanation:

Externality occurs when the activity performed by one agent affects another agent, not reflecting on prices, and may be negative or positive. Positive externalities concern the benefits to a given agent caused by the influence of another agent's action. Thus, as there is a positive external benefit, the social benefit is greater than the private social benefit, generating less than the socially desirable amount produced.