Question

what does a positive externality cause?the marginal social benefit to be equal to the marginal private cost of the last unit producedthe marginal social benefit to be less than the marginal private cost of the last unit producedthe marginal social benefit to exceed the marginal private cost of the last unit producedthe marginal private benefit to exceed the marginal social cost of the last unit produced

Answer 1

A positive externality causes the marginal social benefit to exceed the marginal private cost of the last unit produced, as society gains additional benefits not accounted for by producers.

Step-by-step explanation:

A positive externality leads to a situation where the marginal social benefit (MSB) of producing a good or service exceeds the marginal private cost (MPC) of producing the last unit. This means that the third parties, or society at large, receive additional benefits from the production or consumption of the good that are not captured by the market price.

Because of this, markets tend to underproduce goods with positive externalities since private firms do not receive the full economic benefit of their production, which includes the externality. To address this, compensation for the external benefits might incentivize producers to increase output.

In terms of options provided, this means that a positive externality causes the marginal social benefit to exceed the marginal private cost of the last unit produced.