Fire extinguishers exhibit positive externalities because, even though people buy them for their own use, they may prevent fire from damaging the property of others.The following graph shows the market for fire extinguishers.

Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference.

Use the black point (plus symbol) to indicate the market equilibrium level of output. Then use the grey point to indicate the efficient level of output in this case.Suppose the external benefit is $10 per extinguisher.

True or False: Taxing people $10 for every fire extinguisher they buy would yield the efficient outcome.