Question

a) Explain the positive externality associated with being an organ donor

b) What does this mean about the number of people that will actually be organ donors compared the socially optimal number of people?

Answer 1

a) When a organ is donated , a life is saved which increases human capital and producers better , healthy individuals in labor force . This person who receives the organ then adds to economic growth and production . So an organ donor saves life which in turn improves the society as a whole . This is the positive externality .

b) The number actually will be lower than socially optimal number . Organ donation is free which causes the product or service to be under produced .