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suppose of the production of widgets created an external benefit that is people who are neither the consumer or the producer were better off because widgets were made well the quantity in the market determined by supply and demand of 5,500 widgets does not take into consideration that external benefit we would like that external benefit to be internalized we would like consumers and producers to take into consideration the impact it has on the rest of society and if they did then the quantity produced in the market would be more than what supply and demand set it to be that is with goods that have external benefits the quantity set by the market is less than what is socially optimal so how can we get people to internalize that external benefit well what we would like instead of the demand curve is to have what we call the marginal social benefit curve the marginal social benefit curve looks at the value to consumers plus the value to those who are neither consumers or producers suppos
