Answer: 2) Less than efficient amount of good would be
traded.
Reason: meaning there would be condition
of under consumption. Positive externalities happen when
the unrelated third party accrues the benefits of activity
undertaken by some other parties. This leads to market failure.
Why? When goods with positive externalities would be
provided by free market mechanism, people will get benefits from
other people's purchase of that good without paying for that good
instead. Hence less than efficient amount would be traded.
Example goods with positive externality includes: Acquiring of
education by one person who imparts her knowledge to others,
Smoke detectors in adjoining flats etc.