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A-Level Economics · Positive production externality diagram question

Which point is the SOCIAL optimum?

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The diagram

The answer

Point F. Where the TRUE cost to society (MSC) meets benefit: point F, quantity 7. Society's real cost is MSC (private cost minus the spillover benefit): it crosses D at point F, quantity 7 — more than the market delivers.

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

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