Can you explain this for me? I got this wrong. **Understanding Positive Externalities in Market Economics**When considering the impact of positive externalities on a market, it is essential to determine how these externalities affect both the level of output and the pricing mechanisms. Below is a multiple-choice question aimed at addressing this concept.### Question:**Which of the following statements about a market that is affected by a positive externality is correct?**### Options:1. ○ The optimum level of output is less than the free-market level of output and the optimum price is less than the free-market price. 2. ○ The optimum level of output is less than the free-market level of output and the optimum price is greater than the free-market price. 3. ○ The optimum level of output is greater than the free-market level of output and the optimum price is greater than the free-market price. 4. ○ The optimum level of output is greater than the free-market level of output and the optimum price is less than the free-market price.### Explanation:In the context of positive externalities, such as technological innovations or public goods, the social benefit exceeds the private benefit. This often leads to a situation where the free-market output and price do not reflect the socially optimal levels.- **Free-Market Output and Price:** This is where supply and demand intersect without considering the positive spillover effects on third parties.- **Optimum Level of Output and Price:** This occurs after accounting for the additional social benefits, resulting in higher output and potentially higher pricing to reflect these benefits.Let's closely inspect the correct option:**Correct Answer:**- The optimum level of output is greater than the free market level of output and the optimum price is greater than the free market price.This means that due to positive externalities, the true societal value of a product or service leads to a higher quantity produced and a higher price when all benefits are considered.Understanding these dynamics helps in forming policies and regulations that encourage behaviors and innovations that result in societal benefits beyond individual gains.

Market failure: It refers to the situation in which the destruction of goods and services is…

Which of the following statements about a market that is affected by a positive externality is correct? The optimum level of output is less than the free market level of output and the optimum price is less than the free market price. The optimum level of output is less than the free market level of output and the optimum price is greater than the free market price. The optimum level of output is greater than the free market level of output and the optimum price is greater than the free market price. The optimum level of output is greater than the free market level of output and the optimum price is less than the free market price.

Which of the following statements about a market that is affected by a positive externality is correct? The optimum level of output is less than the free market level of output and the optimum price is less than the free market price. The optimum level of output is less than the free market level of output and the optimum price is greater than the free market price. The optimum level of output is greater than the free market level of output and the optimum price is greater than the free market price. The optimum level of output is greater than the free market level of output and the optimum price is less than the free market price.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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