A positive externality or external benefit occurs when:
A)product differentiation increases the variety of products available to consumers.
B)the benefits associated with a product exceed those accruing to people who consume it.
C)a firm produces at the P = MC output.
D)economic profits are zero in the long run.

Question

Quizplus · Accepted Answer

A positive externality occurs when the benefits of a product spill over to others who are not directly involved in the transaction. This means that the social benefit of a product exceeds the private benefit that accrues to the consumer who buys it. For example, buying a hybrid car not only benefits the owner in terms of fuel savings but also benefits society by reducing pollution and carbon emissions.

A Positive Externality or External Benefit Occurs When