Positive Externalities

Watch the video by Jacob Clifford (https://www.youtube.com/watch?v=hvMAec06_Uo )and answer the following questions.

11. Negative externalities are a sign that the market is not producing the allocatively efficient quantity of goods or services since there is over-allocation of resources dedicated to the production. What does a positive externality tell us? 12. How does the free market deal with the spillover benets associated with positive externalities? Externalities Graphing Practice A chemical firm is producing a good that causes a negative externality. 13. Using a demand and supply graph, show market equilibrium using the labels, Pe and Qe. Label 8 as MPC. Amend the graph to show the level of optimum output Qo. Label the new S curve as MSC. P Q 14. What are the ways that the firm can be forced to correct the pollution? A fire alarm company sells its product in the market. The product results in positive externalities. 15. Using a demand and supply graph, show the market equilibrium using the labels, Pe and Qe. Label D as MPB. Amend the graph to show the level of optimum output Qo. Label the new D curve as MSB. P Q 16. What are ways which society uses to gain the socially optimum benets from the re alarms