A positive consumption externality results in:
A)A market equilibrium quantity traded being more than the surplus-maximizing quantity, and consumers paying too high a price.
B)A market equilibrium quantity traded being more than the surplus-maximizing quantity, and consumers paying too little for the product.
C)The market output being below the surplus-maximizing level, and the market equilibrium price paid by consumers being too high.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

A positive consumption externality means that the social benefits of consumption exceed the private benefits, leading to a situation where the market output is less than the socially optimal level. This results in a higher equilibrium price than what would be ideal for maximizing total surplus.

A Positive Consumption Externality Results In