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A-Level Economics · Positive consumption externality diagram question

Vaccinations benefit others too: MSB sits above MPB. Which point is the FREE-MARKET outcome?

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The diagram

The answer

Point E. People only weigh their PRIVATE benefit: MPB crosses S at point E, quantity 5 — society wants more. Individuals ignore the benefit to others, so the market settles where MPB crosses S: point E — an UNDERconsumption.

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This is one of 5 questions on the positive consumption externality diagram — every corner lettered, every wrong answer diagnosed.

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