Question

Suppose the production of a good results in positive externalities. The market will tend to _______________ this good and the good's marginal social benefits curve will ______________________. a. overproduce, lie to the left of the good's demand curve b.

Answer 1

Answer:

Suppose the production of a good results in positive externalities. The market will tend to overproduce this good and the good's marginal social benefits curve will lie to the left of the good's demand curve.

Explanation:

A positive production externality is the positive effect an activity imposes on an unrelated third party such as the positive effect production activity has on the market.

A positive externality exists if the production and consumption of a good or service benefits a third party not directly involved in the market transaction. For example, education directly benefits the individual and also provides benefits to society as a whole through the provision of more responsible citizens.