suppose that scientists discover that this particular product has a significant Positive Externality. As we learned in class, the Demand curve is a depiction of marginal private benefit ( MPB )....

suppose that scientists discover that this particular product has a significant Positive Externality.  As we learned in class, the Demand curve is a depiction of marginal private benefit (
MPB
). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (
MSB
) is higher than Marginal Private Benefit (
MPB
).

Add this
MSB₁

 to the same graph you created for Question 5.  Absent any government intervention, what are the equilibrium price
P₁

, equilibrium quantity
Q₁

, the resulting Consumer Surplus
CS₁

, and the resulting Producer Surplus
PS₁

?

Indicate the Socially Optimal output,
Q_SO1

. Graphically indicate the size of Dead Weight Loss
DWL₁

 if there is such a loss.

In the narrative, please explain how you determined the socially optimal output level and the presence (or absence) of dead-weight loss in this situation. Is the market producing too much, too little, or just the right amount of the product with a positive externality in the absence of government intervention? If an intervention is desirable, give an example of such an intervention and briefly explain it.