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Abstract
This paper fills the gap of modeling positive externality cases when private marginal
cost is higher than social marginal cost. Within this unique type of divergence of marginal costs
two cases are scrutinized: social marginal benefit being higher than private marginal benefit, and
vice versa, social marginal benefit being lower than private marginal benefit. Empirical case in
study is commercial shellfish farming firm on the West Coast. The study shows that contrary to
popular beliefs correcting for positive externalities does not always result in a positive welfare;
however, it does result in a positive welfare for the study case of the particular shellfish farm.