Comparing Private and Socially Optimal Outcomes with Externalities Page 1 of 1 Private Marginal Private Marginal Social Marginal Quantity Benefit (PMB) Cost (PMC) External Benefit Benefit (SMB) 0 $120 $20 $80 $200 10 $110 $30 $80 $190 20 $100 $40 $80 $180 30 $90 $50 $80 $170 40 $80 $60 $80 $160 50 $70 $70 $80 $150 60 $60 $80 $80 $140 70 $50 $90 $80 $130 80 $40 $100 $80 $120 90 $30 $110 $80 $110 100 $20 $120 $80 $100 What is the Private Market Equilibrium Price? 33 What is the Private Market Equilibrium Quantity? () There is a positive externality associated with this good which causes an external benefit of $80 at every quantity, as shown above. What is the Socially Optimal Price? $ What is the Socially Optimal Quantity? () Relative to the Private Market Equilibrium Price, the Socially Optimal Price (select from this menu) Relative to the Private Market Equilibrium Quantity, the Socially Optimal Quantity J (select from this menu) is higher. ket, it is most likely that the Private Market will is lower. is the same. cannot be determined without additional information. d help the market reach the Socially Optimal Quantity and Price, which course of action would be best? 4} (select from this menu) o What is the Private Market Equilibrium Price? $ What is the Private Market Equilibrium Quantity? (3 There is a positive externality associated with this good which causes an external benefit of $80 at every quantity, as shown above. What is the Socially Optimal Price? $ What is the Socially Optimal Quantity? What is the Socially Optimal Quantity? Relative to the Private Market Equilibrium Price, the Socially Optimal Price (select from this menu) Relative to the Private Market Equilibrium Quantity, the Socially Optimal Quantity (select from this menu) In the absence of any government intervention in this market, it is most likely that the Private Market will (select from this menu) $ If the government wanted to internalize this externality and help the market reach the Socially Optimal Quantity and Price, which course of action would be best? J (select from this menu) A producer tax of $80 for each unit bought and sold. A consumer subsidy of $80 for each unit bought and sold. Do nothing