When positive externalities exist in the consumption of a good, the marginal social benefit:
A) equals the marginal benefit received by consumers of the good minus the marginal benefit to third parties.
B) equals the marginal cost of producing the good plus the marginal cost to third parties.
C) equals the marginal benefit received by consumers of the good plus the marginal benefit to third parties.
D) could be either greater than or less than the marginal benefit received by consumers of the good depending on the equilibrium price determined in competitive markets.

Question

Quizplus · Accepted Answer

The marginal social benefit includes both the benefit to consumers and the additional benefit to third parties, which is characteristic of positive externalities.

When Positive Externalities Exist in the Consumption of a Good