If consumption of a good creates positive externalities,then

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Quizplus · Accepted Answer

When consumption of a good creates positive externalities, the marginal social benefit (MSB) is greater than the marginal private benefit (MPB) because the benefit spills over to society beyond just the individual consumer. As a result, private demand is lower than what would be socially optimal. This can lead to market failure, as the market will not produce enough of the good due to the underestimation of its benefits. Thus, in order to achieve efficiency, the government may need to subsidize the good or provide other incentives to promote the consumption of the good.

If Consumption of a Good Creates Positive Externalities,then