What+is+a+positive+externality?+Give+an+example+and+illustrate+your+answer+with+a+diagram.

===92. What is a positive externality? Give an example and illustrate your answer with a diagram. ===

- Education

A positive externality is a benefit that arises for third parties from the consumption and/or production of a good for which neither firm nor consumer has paid for. In the diagram, the current level of output (of education)is at (Pe,Qe), whereas the socially optimal level of output (of education) is (Po,Qo). Therefore, resources are being underallocated, causing Marginal Social Benefit to be greater than Marginal Social Cost and therefore, a dead weight loss to form. Education is a positive externality because it is often underprovided in the economy as a result of being a public good and therefore the government needs to intervene to provide this good. By educating people in society, it would be ensured that the rate of crime decreases and production could also possibly increase as people would be efficient in finding the right type of job and working efficiently in that job.

