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A-Level Economics · Positive consumption externality diagram question

Which area is the potential WELFARE GAIN society misses at the free-market quantity?

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The diagram

The answer

The triangle G E F. Units 5→7 are worth more to society (MSB) than they cost (S) — triangle GEF is unrealised surplus until we get there. Between market (E) and optimum (F), each unit's MSB exceeds its cost — triangle GEF, pointing at the optimum, is the gain society leaves on the table.

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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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