Suppose there is a positive consumption externality for elephants, and that their importation is banned (and there are no elephants as pets in Australia). Further assume that the world price is such that if imports were allowed, some elephants would be imported. You may assume there is no supply of elephants in Australia (the supply curve is vertical at zero). Which of the following is true?

a) The improvement of welfare by allowing the importation of elephants would equal the area under the demand curve and above the world price

b) there is an equivalent tariff which would made the importations of elephants zero, as it is now with the ban

c) the positive externality means that the marginal social valuation is below the demand curve

d) none of the above

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