1. Externalities - Definition and examples the private value, then you should shift the demand curve to reflect the social value of consuming the good.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.SupplyDemandSupplyDemandQUANTITY (Units)With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will bethan thesocially optimal quantity.greaterWhich of the following generates the type of externality previously described? Check all that apply.lessYour roommate, Yvette, has bought a puppy that barks all day while you are trying to study economics.A microbiology lab has published its breakthrough in swine flu research.O Musashi has planted several trees in his backyard that increase the beauty of the neighbourhood, especially during the fall foliage season.The city where you live has granted a permit to put a movie theatre in your neighbourhood, causing traffic jams at night and onweekends.PRICE (Dollars per unit) 1. Externalities - Definition and examplesAn 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 anycompensation for that effect. If the impact on the third party is adverse, it is called aexternality.The following graph shows the demand and supply curves for a good with this type of negative he dashed drop lines on the graph reflect themarket equilibrium price and quantity for this good.positiveShift one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, thenyou should shift the supply curve to reflect the social costs of producing the good; similarly, if the social value of producing the good is not equal tothe private value, then you should shift the demand curve to reflect the social value of consuming the good.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.SupplyDemandSupplyDemandQUANTITY (Units)With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will bethan thesocially optimal quantity.PRICE (Dollars per unit)

An externality refers to a cost or a benefit that arises from production or consumption and has an…

Answered: the private value, then you should…

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 6PA

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1. Externalities - Definition and examples

the private value, then you should shift the demand curve to reflect the social value of consuming the good.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to its original position, just drag it a little farther.
Supply
Demand
Supply
Demand
QUANTITY (Units)
With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be
than the
socially optimal quantity.
greater
Which of the following generates the type of externality previously described? Check all that apply.
less
Your roommate, Yvette, has bought a puppy that barks all day while you are trying to study economics.
A microbiology lab has published its breakthrough in swine flu research.
O Musashi has planted several trees in his backyard that increase the beauty of the neighbourhood, especially during the fall foliage season.
The city where you live has granted a permit to put a movie theatre in your neighbourhood, causing traffic jams at night and on
weekends.
PRICE (Dollars per unit)

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Public wifi hotspots grant many external benefits on society: more equitable access to the internet, increased educational opportunities, and so on. Therefore, the market equilibrium quantity of public wifi hotspots does not equal the socially optimal quantity. The following graph plots the demand for public wifi hotspots (their private value), the supply of public wifi hotspots (the private cost of producing them), and the social value of public wifi hotspots, including both the private value and external benefits.

Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.

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