When the consumption of a good generates positive externalities,_____
A)the private demand curve for the good shifts rightward.
B)the private demand curve for the good shifts leftward.
C)the private demand curve for the good lies below the marginal social benefit curve.
D)the private demand curve for the good lies above the marginal social benefit curve.
E)the equilibrium quantity of the good determined by the free private market is too high.

Question

Quizplus · Accepted Answer

When a good generates positive externalities, the private demand curve does not fully reflect the additional benefits to society. Therefore, the marginal social benefit curve, which includes these external benefits, lies above the private demand curve.

When the Consumption of a Good Generates Positive Externalities,_____