When production or consumption of a product causes positive effects on third parties, it would be preferable if

Question

BlackTom AI · Accepted Answer

Positive externalities (external benefits) occur when production or consumption of a good yields benefits to third parties beyond the private benefit captured by buyers and sellers. In such cases the social benefit exceeds the private benefit, so the market outcome is not socially optimal.

1) Relevant knowledge points and concepts
- Private benefit: the benefit captured by the consumer.
- External benefit: benefit to third parties not reflected in market transactions.
- Social benefit = private benefit + external benefit.
- Market equilibrium without intervention equates private benefit (demand) to supply; the socially optimal equilibrium equates social benefit to supply.
- When social benefit > private benefit, the private market produces/consumes less than the socially optimal quantity (underproduction/underconsumption).

2) Step-by-step reasoning
- The private demand curve reflects private benefit only. Firms and consumers choose quantity Qprivate where private demand = supply.
- Because each unit also creates additional external benefits, the true value to society of each unit is higher than the private demand curve indicates.
- The socially optimal quantity Qsocial is where the social benefit (private + external) equals supply; Qsocial > Qprivate.
- Therefore, to reach the socially optimal outcome, production and consumption should increase (via subsidies, public provision, or support), moving quantity from Qprivate to Qsocial.

3) Calculations
- No numerical calculation is needed; relationship is qualitative: Qsocial > Qprivate because social benefit curve lies above private benefit curve by the external benefit amount.

4) Why the correct answer is correct
- Option b (“the product was produced and consumed in greater quantities”) matches the implication of positive externalities: society would be better off with more production/consumption to capture the external benefits.

5) Why other options are incorrect
- a (less resources allocated): wrong—resources should increase, not decrease.
- c (the price rises): raising price typically reduces consumption; that is counterproductive for positive externalities.
- d (a tax to discourage consumption): taxes reduce consumption and are used for negative externalities; the opposite (subsidy) is appropriate here.

Conclusion: The correct choice is b, which matches the provided answer.

When production or consumption of a product causes positive effects on third parties, it would be preferable if单项选择题

类似问题

Which of the following is not a suitable method of government intervention in a market where production or consumption of the product results in positive externalities?