When a market experiences a positive externality,what can be said
A)The demand curve does not reflect the value to society of the good.
B)Too much of the good is being produced.
C)The government can internalize the externality by imposing a tax on the product.
D)The private value is greater than the social value.

Question

Quizplus · Accepted Answer

When a market experiences a positive externality, the private value that the consumer is willing to pay does not reflect the full value of the good to society. This means that there is a gap between the private value and the social value of the good. The demand curve only reflects the private value, which causes an underproduction of the good. Therefore, the best answer is A.

When a Market Experiences a Positive Externality,what Can Be Said