If consuming a good creates a positive externality, _____.
A)the marginal private benefit from consuming the good exceeds the marginal social benefits
B)the marginal social benefit from consuming the good exceeds the marginal private benefits
C)the private demand for the good is equal to the marginal social benefit
D)the private demand for the good is greater than the marginal social benefit
E)the private demand curve for the good shifts to the right to coincide with the marginal social benefit curve

Question

If consuming a good creates a positive externality, _____.​
A)the marginal private benefit from consuming the good exceeds the marginal social benefits
B)the marginal social benefit from consuming the good exceeds the marginal private benefits​
C)the private demand for the good is equal to the marginal social benefit​
D)the private demand for the good is greater than the marginal social benefit​
E)the private demand curve for the good shifts to the right to coincide with the marginal social benefit curve​

Quizplus · Accepted Answer

When consuming a good creates a positive externality, the marginal social benefit from consuming the good exceeds the marginal private benefits. This means that there are additional benefits to society from consuming the good that are not reflected in the private benefits for the consumer. As a result, the optimal level of consumption is higher than what the consumer would choose based on their own private benefits, leading to a market failure.

If Consuming a Good Creates a Positive Externality, _____