If there are external benefits or positive externalities associated with the consumption of a good or service:
A)the private demand curve will overestimate the true demand curve.
B)the private demand curve will underestimate the true demand curve.
C)consumers will be willing to pay for all these benefits in private markets.
D)the market demand curve will be the vertical summation of the individual demand costs.

Question

Quizplus · Accepted Answer

When there are external benefits, the private demand curve only reflects the private benefits and fails to account for the positive externalities. Therefore, the private demand curve would underestimate the true demand curve since it does not include the additional benefits associated with the consumption of the good or service.

If There Are External Benefits or Positive Externalities Associated with the Consumption