Exhibit 30-5

Refer to Exhibit 30-5. If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points ____________ and the socially optimal output is

Question

Exhibit 30-5 ​

Refer to Exhibit 30-5.  If a positive externality exists, then the external benefits associated with the positive externality equal the distance between points ____________ and the socially optimal output is

Quizplus · Accepted Answer

The socially optimal output is determined by the intersection of the marginal social benefit (MSB) curve and the marginal private cost (MPC) curve. In this graph, the MSB curve is above the demand curve, indicating the positive externality. The distance between points D and B represents the external benefits associated with the positive externality. Therefore, the socially optimal output is at point Q₂, which is the intersection of the MSB curve and the MPC curve. Choice C is the only option that correctly identifies the points representing the external benefits and the socially optimal output.

Exhibit 30-5 ​ Refer to Exhibit 30-5. If a Positive Externality Exists, Then the Externality

Exhibit 30-5 Refer to Exhibit 30-5. If a Positive Externality Exists, Then the Externality