If consumers were able to receive the full social benefits associated with the consumption of goods involving positive externalities, other things being equal, there would probably be:
A)an increase in consumption.
B)a decrease in consumption.
C)a greater misallocation of resources.
D)a decrease in the market price of the product.

Question

If consumers were able to receive the full social benefits associated with the consumption of goods involving positive externalities, other things being equal, there would probably be:
A)​an increase in consumption.
B)​a decrease in consumption.
C)​a greater misallocation of resources.
D)​a decrease in the market price of the product.

Quizplus · Accepted Answer

When consumers receive the full social benefits associated with the consumption of goods involving positive externalities, it incentivizes them to consume more of the good. This is because they now perceive the true value of the good. As a result, there would be an increase in consumption.

If Consumers Were Able to Receive the Full Social Benefits