Question

A positive externality causes A. the social benefit from consuming the good to be the same as the private benefit. B. the social benefit from consuming the good to be greater than the private benefit. C. the social benefit from consuming the good to be less than the private benefit. D. None of the above.

Answer 1

Answer: B. the social benefit from consuming the good to be greater than the private benefit.

Step-by-step explanation:

A POSITIVE EXTERNALITY is one where the benefits are enjoyed by a third party as a result of an economic transaction.

Even though the third parties can be considered to be freeloaders, this externality is encouraged because it has such a larger social benefit which surpasses even private benefit.

For example, a student graduating from a university with skills they learnt there and contributing to society.