Question

question 5
a positive externality occurs when
a jack receives a benefit from johns consumption of a certain good.
b jack receives personal benefits from his own consumption of a certain good.
c jacks benefit exceeds johns benefit when they each consume the same good.
d jacks receives a loss from johns consumption of a certain good.
question 6
a positive externality will cause a market to produce
a more than is socially desirable.
b less than is socially desirable.
c the socially optimal equilibrium amount.
d more than the same market would produce in the presence of a negative externality.

Explanation:

• Question 5: A positive externality is when a third - party (Jack) benefits from the consumption or production (here, John's consumption) of a good. Option B is a private benefit (not an externality), option C is about a comparison of benefits (not the definition of a positive externality), and option D is a negative externality.
• Question 6: In the case of a positive externality, the market does not account for the external benefit. The private marginal benefit is less than the social marginal benefit. So, the market quantity is less than the socially desirable quantity. Firms produce based on private benefits (lower than social benefits), leading to under - production.

Answer:

A. Jack receives a benefit from John's consumption of a certain good
B. less than is socially desirable