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 arise when a product's consumption or production yields benefits to third parties beyond the private buyer or seller. Key concepts: marginal private benefit (MPB), marginal social benefit (MSB), marginal private cost (MPC), and external benefit (EB). The relationship is MSB = MPB + EB. In a free market firms and consumers equate MPB to MPC (or supply), producing the market quantity Qm. Because MSB > MPB (due to EB), the socially optimal quantity Q* satisfies MSB = MPC and therefore Q* > Qm.

Step-by-step reasoning:
1. Define MPB (private willingness to pay) and EB (external benefit accruing to others). MSB = MPB + EB.
2. Market equilibrium occurs where MPB = MPC → quantity Qm.
3. Social optimum requires accounting for EB: set MSB = MPC → MPB + EB = MPC → quantity Q*.
4. Since EB > 0, MSB > MPB at each quantity, so the equality MSB = MPC happens at a larger quantity than MPB = MPC. Thus Q* > Qm.
5. Therefore it is preferable for the product to be produced and consumed in greater quantities (closer to Q*), to capture the extra social benefits.

Why answer (a) is correct: Producing and consuming more moves output toward the socially efficient level where third‑party benefits are internalized, increasing total social welfare.

Why other options are incorrect:
- (b) Less resources allocated would move output further away from the social optimum and reduce welfare, since positive externalities mean marginal social benefit exceeds private benefit.
- (c) A price rise typically reduces consumption; that is contrary to the goal of increasing output to capture external benefits.
- (d) Imposing a tax discourages consumption and reduces output; the correct policy for positive externalities is generally a subsidy or provision, not a tax.

Conclusion: The correct choice is a. the product was produced and consumed in greater quantities, 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?