Final answer:
The socially optimal quantity is greater than the market equilibrium quantity when an activity yields positive externalities, as the market does not capture the extra benefits to society.
Step-by-step explanation:
If an activity yields positive externalities, such as technology spillovers, the socially optimal quantity is greater than equilibrium quantity. This is because the benefits to society (social benefits) are not fully accounted for in the market transactions. In the marketplace, activities with positive externalities, like vaccinations, tend to be underproduced because the market fails to recognize the external benefits that these activities provide to non-consumers. Equilibrium in a market is reached when the quantity demanded is equal to the quantity supplied.
However, when there are positive externalities, the marginal social benefit (MSB) is greater than the marginal private benefit (MPB), leading to a situation where the allocative efficiency is not achieved at the market equilibrium. Therefore, the optimal social quantity would be higher to include those external benefits. In summary, while the market equilibrium reflects the point where supply and demand intersect, it does not necessarily account for the external benefits conveyed to others, which is why the socially optimal quantity surpasses the market equilibrium when there are positive externalities, such as in the case of technology spillovers or public health benefits from vaccines.