The graph below shows the market for house-painting services. Use it to answer the questions that follow.

a. Painting the exterior of your house yields external benefits for your neighbors. Label the private marginal benefit and social marginal benefit curves and show the amount of the external benefit. 

b. Show the equilibrium price and quantity. 

c. What is the socially optimal quantity in this market? 

d. Does the market produce too much or too little of this good relative to the socially optimal outcome? How much? 

Transcribed Image Text:

Price of house painting $2,200 $1,800 $1,600 # Demand 110 140 Supply Quantity of houses painted (in thousands) Stevenson/Wolfers, Principles of Economics, 1e, 2020 Worth Publishers