Which of the following is true of positive externalities? The marginal social benefit is greater than...
- Which of the following is true of positive externalities?
- The marginal social benefit is greater than the marginal private benefit, which leads to an under-provision of goods
- The marginal social benefit is greater than the marginal private benefit, which leads to an over-provision of goods
- The marginal social benefit is less than the marginal private benefit, which leads to an under-provision of goods.
- the marginal social benefit is less than the marginal private benefit, which leads to an over-provision of goods.
Homework Answers
Answer
Option a
The marginal social benefit is greater than the marginal private benefit, which leads to an under-provision of goods
===
marginal social benefit=marginal private benefit+marginal external benefit
the marginal external benefit is not zero as the market has positive externality so the MSB>MPB and the production at private equilibrium are less because MPB=MC is left of the MSB=MC.
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