Assuming a product can be manufactured competitively without any externalities at an efficient quantity of 1,500 units and an efficient price of $50.00 per unit, what efficient quantity-price combination would be consistent with a positive externality?

Question

Quizplus · Accepted Answer

Positive externalities in production or consumption lead to the social value of a product being higher than the private value. This typically results in a higher quantity being efficiently produced or consumed than would be the case without the externality. Among the given options, D) 1,700 units at $56.00 per unit price indicates an increase in quantity, consistent with the presence of a positive externality, suggesting that the social optimum is to produce more of the good.

Assuming a Product Can Be Manufactured Competitively Without Any Externalities