Consider the market for fire extinguishers.

a Why might fire extinguishers exhibit positive externalities in consumption?

b Draw a graph of the market for fire extinguishers, labelling the demand curve, the social-value curve, the supply curve and the social-cost curve.

c Indicate the market equilibrium level of output and the efficient level of output. Give an explanation for why these quantities differ.

d If the external benefit is $10 per extinguisher, describe a government policy that would result in the efficient outcome.