Question

. Illustrate the market for a good that produces a positive externality, labeling the internal demand...

. Illustrate the market for a good that produces a positive externality, labeling the internal demand curve, the internal supply curve, the social benefit curve, the market equilibrium of output and the socially efficient level of output.

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Answer #1

The externality means that the external benefit or cost imposed by the third party. In the same way, the positive externality implies that the external benefit caused by the action of the third party. When positive externality occurs in the market, then it produces less than the socially optimal quantity of goods and services. The positive externality is presented in the following diagram:

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