Which of the following is true if the production of a good gives rise to a positive externality?
A) The marginal social benefit from each level of output exceeds the consumers' willingness to pay.
B) The marginal private benefit from production exceeds the marginal social benefit.
C) The demand curve for the good shifts to the left in the presence of positive externalities.
D) The demand curve for the good shifts to the right in the presence of positive externalities.

Question

Quizplus · Accepted Answer

When a good's production results in a positive externality, it means that there are additional benefits to society that are not captured by the price consumers are willing to pay. Therefore, the marginal social benefit (which includes both the private benefit and the external benefit) exceeds the consumers' willingness to pay, as stated in option A.

Which of the Following Is True If the Production of a Good