Positive externalities

Question 1

What is a positive externality of consumption ?

Answer 1

Benefits to 3rd parties resulting of the actions from consumers .

E.G Healthcare and education

Question 2

How would I draw a positive externality on a diagram ?

Answer 2

MSB > MPB

Question 3

What are positive externality of production ?

Answer 3

Benefits to 3rd parties as a result of the actions of producers

E.g - in work training and R+D

Question 4

Analyse the diagram for a positive externality of production

Answer 4

Firms only consider private cost . resources provided at private optimum instead of social optimum = allocative inefficiency