The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Suppose that a positive externality arises as a result of the production of this good. Adjust the following graph by shifting one of the curves to reflect the presence of the positive externality. PRICE AND COST The market fails in that it I overproduces underproduces Supply Demand the good. ¦ } Demand Supply

The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Suppose that a positive externality arises as a result of the production of this good. Adjust the following graph by shifting one of the curves to reflect the presence of the positive externality. PRICE AND COST The market fails in that it I overproduces underproduces Supply Demand the good. ¦ } Demand Supply

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 42P: Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the...

See similar textbooks

Similar questions

Identify the following situations as an example of a negative or a positive externality: You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds. Your neighbor paints his house a hideous color. Investments in private education raise your countrys standard of living. Trash dumped upstream flows downstream right past your home. Your roommate is a smoker, but you are a nonsmoker.
Refer to Table 12.2. The externality created by the refrigerator production was 100. However, once we accounted for both the private and additional external costs, the market price increased by only 50. If the external costs were 100 why did the price only increase by 50 when we accounted for all costs?
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
Draw a standard supply and demand diagram for televisions, and indicate the equilibrium price and output. a. Assuming that the production of televisions generates external costs, illustrate the effect of the producers being forced to pay a tax equal to the external costs generated, and indicate the equilibrium output. b. If instead of generating external costs, television production generates external benefits, illustrate the effect of the producers being given a subsidy equal to the external benefits generated, and indicate the equilibrium output.
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?