Exhibit 30-5

-Refer to Exhibit 30-5. If a positive externality exists then the socially optimal output is

Question

Exhibit 30-5
​
 
-Refer to Exhibit 30-5. If a positive externality exists then the socially optimal output is

Quizplus · Accepted Answer

The socially optimal output in the presence of a positive externality is where the social benefit curve intersects the supply curve, which typically results in a higher output than the market equilibrium (where private demand intersects supply). This is because the social benefit includes both private benefit and the external benefit, leading to a higher valuation of the good or service.

Exhibit 30-5 ​

Exhibit 30-5