Consider an imperfectly competitive firm which generates a positive externality? So SMC < PMC.

   The firm maximizes profits by producing where PMC = MR, producing Q* at price P*. The allocatively efficient amount would be produced where SMC = D, giving output of QAE at price PAE . If the industry were perfectly competitive it would produce QPC,less that QAE but greater than Q*. If a firm produces a positive externality social inefficiency is increased if it is imperfectly competitive.

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