The inclusion of external benefits in the decision making process determining equilibrium price and quantity leads to

Question

Quizplus · Accepted Answer

Including external benefits will increase the overall value of the product to society, which will result in a greater demand for the product at each price level. This will shift the demand curve to the right, resulting in a higher equilibrium price and quantity sold. However, the externality may also lead to an increase in supply as producers are incentivized to produce more due to the positive externalities, resulting in a lower equilibrium price. Overall, the net effect will be an increase in quantity sold at a lower price, leading to lower priced items and increased quantity.

The Inclusion of External Benefits in the Decision Making Process