Given a positive externality, the marginal social benefits curve lies to the __________ of the demand curve, with the market output __________ the socially optimal output.

Question

Quizplus · Accepted Answer

In the presence of a positive externality, the marginal social benefits (MSB) curve lies to the right of the private demand curve because it includes the additional benefits to society that are not captured by the private market. This results in the market output being less than the socially optimal output, as the market fails to account for the external benefits.

Given a Positive Externality, the Marginal Social Benefits Curve Lies