The net increase to total surplus when a positive externality is corrected is due to:
A)the transfer of surplus from those affected by the externality to the consumer.
B)the increased number of units bought and sold in the market.
C)the transfer of surplus from the consumer to those affected by the externality.
D)None of these are true.

Question

Quizplus · Accepted Answer

When a positive externality is corrected, typically through government intervention or subsidies, it aligns the social benefit with the private benefit, leading to an increase in the quantity of the good or service consumed and produced. This adjustment increases the total surplus in the market because more units are bought and sold at a socially optimal level, reflecting the true value of the good or service to society.

The Net Increase to Total Surplus When a Positive Externality