If the consumption of a good involves a positive externality, ...

[Arii_bell]

If the consumption of a good involves a positive externality, what can be done to encourage consumers to consume more of the good?
 
  What will be an ideal response?

Question 2

Refer to the scenario above. Which of the following statements will hold true if the starting bid is 300?
 
  A) Everyone except Bob will take part in the auction.
  B) Everyone will take part in the auction.
  C) Only Bob will take part in the auction.
  D) Everyone except Joe will take part in the auction.

[brittanywood]

Answer to Question 1

If the consumption of a good involves a positive externality, the marginal social benefit derived from the good exceeds the marginal private benefit. However, the consumers of the good do not take this additional benefit into consideration and continue consuming only as long as the marginal private benefit from consumption exceeds the marginal private cost. In this case, if the consumption of the good is subsidized, the marginal private benefit from consumption will increase, causing consumers to consume more.

Answer to Question 2

A

[Arii_bell]

YES! Correct, THANKS for helping me on my review

[yeungji]

TYSM