Price of Gardening ($) L M O P S U Q N MPB MC MSB Quantity of Gardening a) Using the letters on the diagram, describe the areas of (i) consumer surplus and (ii) producer surplus if the private market equilibrium occurs. b) Using the letters indicated on the diagram, describe the areas of (i) total social surplus and (ii) total externality if the socially optimal (Pareto efficient) level of gardening occurs. c) What is the area of deadweight loss? Does the neighborhood want to increase or decrease the level of gardening? If the neighborhood association wanted to effect this change, what measures could it take?

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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7) Issa is regularly outside of her house and tending her flowers and gardening. Her flowers are so vibrant and
colorful that everyone in the neighborhood enjoys looking at them and the property prices of all the houses in the
neighborhood have increased. The marginal social benefit (MSB), marginal private benefit (MPB) and marginal
cost (MC) curves of her gardening activities are drawn below.
Transcribed Image Text:7) Issa is regularly outside of her house and tending her flowers and gardening. Her flowers are so vibrant and colorful that everyone in the neighborhood enjoys looking at them and the property prices of all the houses in the neighborhood have increased. The marginal social benefit (MSB), marginal private benefit (MPB) and marginal cost (MC) curves of her gardening activities are drawn below.
Price of
Gardening ($)
L
M
O
P
S
כ
Q
N
MPB
MC
MSB
Quantity of Gardening
a) Using the letters on the diagram, describe the areas of (i) consumer surplus and (ii) producer surplus if the private
market equilibrium occurs.
b) Using the letters indicated on the diagram, describe the areas of (i) total social surplus and (ii) total externality if
the socially optimal (Pareto efficient) level of gardening occurs.
c) What is the area of deadweight loss? Does the neighborhood want to increase or decrease the level of gardening? If
the neighborhood association wanted to effect this change, what measures could it take?
Transcribed Image Text:Price of Gardening ($) L M O P S כ Q N MPB MC MSB Quantity of Gardening a) Using the letters on the diagram, describe the areas of (i) consumer surplus and (ii) producer surplus if the private market equilibrium occurs. b) Using the letters indicated on the diagram, describe the areas of (i) total social surplus and (ii) total externality if the socially optimal (Pareto efficient) level of gardening occurs. c) What is the area of deadweight loss? Does the neighborhood want to increase or decrease the level of gardening? If the neighborhood association wanted to effect this change, what measures could it take?
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