An externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is beneficial, it is called a positive 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. Shift one of the curves to reflect the presence of the externality. If there are external costs of production, then you should shift the supply curve reflect the social costs of producing the good; similarly, if there are external benefits from production, then you should shift the demand curve to reflect the social benefits from consuming the good. PRICE (Dollars per unit) QUANTITY (Units) Supply Demand Demand Supply With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. Your roommate, Larry, has bought a bird that keeps you up at night with its chirping. than the Janet has planted hundreds of flowers in her front yard, beautifying the neighborhood both for herself and for her neighbors. A microbiology lab has published its breakthrough in swine flu research. 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 pil up in your backyard.
An externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives any compensation for that effect. If the impact on the third party is beneficial, it is called a positive 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. Shift one of the curves to reflect the presence of the externality. If there are external costs of production, then you should shift the supply curve reflect the social costs of producing the good; similarly, if there are external benefits from production, then you should shift the demand curve to reflect the social benefits from consuming the good. PRICE (Dollars per unit) QUANTITY (Units) Supply Demand Demand Supply With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. Your roommate, Larry, has bought a bird that keeps you up at night with its chirping. than the Janet has planted hundreds of flowers in her front yard, beautifying the neighborhood both for herself and for her neighbors. A microbiology lab has published its breakthrough in swine flu research. 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 pil up in your backyard.
Chapter4: Markets In Action
Section: Chapter Questions
Problem 18SQ
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please answer the following question with graph
Transcribed Image Text:An externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives any
compensation for that effect. If the impact on the third party is beneficial, it is called a positive 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.
Shift one of the curves to reflect the presence of the externality. If there are external costs of production, then you should shift the supply curve
reflect the social costs of producing the good; similarly, if there are external benefits from production, then you should shift the demand curve to
reflect the social benefits from consuming the good.
PRICE (Dollars per unit)
QUANTITY (Units)
Supply
Demand
Demand
O
Supply
With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be
efficient quantity.
Which of the following generate the type of externality previously described? Check all that apply.
than the
Your roommate, Larry, has bought a bird that keeps you up at night with its chirping.
Janet has planted hundreds of flowers in her front yard, beautifying the neighborhood both for herself and for her neighbors.
O A microbiology lab has published its breakthrough in swine flu research.
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 pil
up in your backyard.
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