Y1 24 Positive externalities

Question 1

Positive externality in consumption

Answer 1

Firms only produce as much as they want/need which is not best for society, underproduction creates misallocation of resources

Question 2

Positive externalities in consumption

Answer 2

Consumers disregard societal benefits of consuming good and only consume as much as they want, underconsumption creates misallocation of resources