Suppose the production of a good results in positive externalities. If output occurs at the intersection of the marginal social benefits curve and the supply curve, then

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When output occurs at the intersection of the marginal social benefits curve and the supply curve, it is at the socially optimal level (A). Additionally, more output will be produced than if only private benefits were considered, as positive externalities increase the perceived benefit (C).

Suppose the Production of a Good Results in Positive Externalities