If the social benefit of consuming a good or a service exceeds the private benefit
A) a negative externality exists.
B) the market achieves economic efficiency.
C) a positive externality exists.
D) the sum of consumer surplus and producer surplus is maximized.

Question

Quizplus · Accepted Answer

When the social benefit of consuming a good or a service exceeds the private benefit, a positive externality exists. This means that there are additional benefits accruing to individuals other than the consumers. In this case, the market may not achieve economic efficiency since the private benefits do not take into account the full social benefits.

If the Social Benefit of Consuming a Good or a Service