Positive Externalities Are

question 20

Multiple Choice

Positive externalities are:

• A) similar to negative externalities in their ease of measuring marginal benefits.
• B) likely to be solved with the use of a Pigouvian tax.
• C) difficult to measure, since marginal social benefits are hard to observe.
• D) result from greater than optimal production of a good.

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Definitions:

MRS

The Marginal Rate of Substitution is the rate at which a consumer is willing to exchange units of one good for units of another good while maintaining the same level of utility.

Marginal Utility

Marginal utility is the additional satisfaction or utility that a consumer receives from consuming one more unit of a good or service.

Utility Maximization

A theory in economics that suggests consumers will allocate their resources to maximize their utility or satisfaction given their income and the prices of goods and services.

Consumption Good

A good that is utilized by consumers to satisfy their current wants or needs.