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The Diagram Below Illustrates a Positive Externality

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The diagram below illustrates a positive externality. D is the marginal private benefit and D1 is the marginal social benefit. The diagram below illustrates a positive externality. D is the marginal private benefit and D<sub>1</sub> is the marginal social benefit. Referencing this diagram describe how a government can use direct regulation to eliminate the problem caused by the positive externality. What is a potential problem with this approach? Referencing this diagram describe how a government can use direct regulation to eliminate the problem caused by the positive externality. What is a potential problem with this approach?

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The problem caused by the marginal socia...

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