Answered step by step
Verified Expert Solution
Question
1 Approved Answer
An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives
An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is adverse, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of consuming the good. O Supply Demand Supply PRICE (Dollars per unit) Demand QUANTITY (Units)with this type of extemality, in the absence of government intervention, the market equilibrium quantity produced will be V than the socially optimal quantity. which of the following generate the type of externality previously described? Check ai'f that apofy. |:| Alyssa has planted hundreds ofowers in her front yard, beautifying the neighborhood both for herself and for her neighbors. [I The city where you live has turned the publicly owned land next to your house into a park, causing trash dropped by park visitors to pile up in your backyard. |:| A leading electronics manufacturer has discovered a new technology that dramatically improves the picture quality of plasma televisions. Firms of all brands have free access to this technology. |:| Your roommate Hilary has bought a cat to which you are allergic
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started