Question

For a positive externality, _________________________than the social benefits.

		private benefits of an action are more
		social benefits of an action are more
		private benefits of an action are less
		social costs of an action are less

Answer 1

Private benefits of an action are less

Positive externality is a benefit cause to third party or society because of any action by an individual for which the individual incurs the cost and third party or society enjoys the benefit without incurring the cost.

Private benefit is a benefit caused to any individual who is directly responsible for the action and who has incurred cost for that benefit. Social benefit is the total benefit caused to the society which also includes private benefit. This means social benefit is more than private benefit.

Therefore for a positive externality private benefits of an action are less social benefits.