causes of market failure: positive externalities

define positive externality

is a benefit enjoyed by the third party as a result of an economic transaction

what should be higher on a benefit and cost diagram

MSB should be higher than MPB

what is the role of the government in this case

to promote policies and legislations that promote positive externalities so the economy can address market failure.

what is represented in the lined triangle

the net welfare gain or positive externality. sits between MSB MPB lines and above the lower eq