An external benefit creates ?
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Answer: C. a social value curve that is above the demand curve (private value curve) for good
Explanation
An external benefit implies that total societal value exceeds private value, placing the social value curve above the private demand curve. External benefits generate positive spillovers that enrich third parties beyond the direct consumer of the good. Adding this external value vertically to the private demand curve constructs the higher social value curve. Externalities occur when market transactions impose costs or confer benefits on uninvolved third parties. Private demand reflects only the direct utility experienced by the immediate purchaser of the product. Welfare economics utilizes social value curves to determine optimal resource allocation in the presence of externalities.
A social cost curve above the supply curve describes a negative production externality rather than a benefit. Stating that none of these answers are correct is false because the social value option is accurate. Placing the social value curve below the demand curve would incorrectly describe a negative externality effect.
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