10. Likewise, in the case of positive externalities there is no incentive for the private consumer to pay for any more than the benefits that they receive as individuals. However, there may also be benefits that exist for society as a whole. • Positive externalities result in an (underallcation. overallocation) of resources to the production of a product. All of the benefits associated with the product are not reflected in the (demand, supply) curve. The (demand, supply) curve lies to the (right, left) of the full-benefits demand curve. • Thus, due to the positive externalities, benefits are (underestimated, overestimated); resources are (underallocated, overallocated) where positive externalities exist. • Examples of positive externalities of production are In the case of public goods (and services), it is impossible to divide the product into individual saleable units for consumers to purchase and, additionally, the exclusion principle doesn't apply. That is, even if the product could be sold, consumers would not want to purchase it because "CE would take advantage of their purchase. People could receive the benefits without paying for the product. • In such cases, there is no incentive for individuals to purchase the item on their own even though they may desire the good or service. These are public goods and services and their provision is made possible through government purchases where tax revenues can be used to provide the product. --r_ _)"
10. Likewise, in the case of positive externalities there is no incentive for the private consumer to pay for any more than the benefits that they receive as individuals. However, there may also be benefits that exist for society as a whole. • Positive externalities result in an (underallcation. overallocation) of resources to the production of a product. All of the benefits associated with the product are not reflected in the (demand, supply) curve. The (demand, supply) curve lies to the (right, left) of the full-benefits demand curve. • Thus, due to the positive externalities, benefits are (underestimated, overestimated); resources are (underallocated, overallocated) where positive externalities exist. • Examples of positive externalities of production are In the case of public goods (and services), it is impossible to divide the product into individual saleable units for consumers to purchase and, additionally, the exclusion principle doesn't apply. That is, even if the product could be sold, consumers would not want to purchase it because "CE would take advantage of their purchase. People could receive the benefits without paying for the product. • In such cases, there is no incentive for individuals to purchase the item on their own even though they may desire the good or service. These are public goods and services and their provision is made possible through government purchases where tax revenues can be used to provide the product. --r_ _)"
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:10. Likewise, in the case of positive externalities there is no incentive for the private consumer to pay for
any more than the benefits that they receive as individuals. However, there may also be benefits that exist
for society as a whole.
• Positive externalities result in an (underallcation. overallocation) of resources to the production
of a product. All of the benefits associated with the product are not reflected in the (demand,
supply) curve. The (demand, supply) curve lies to the (right, left) of the full-benefits demand
curve.
• Thus, due to the positive externalities, benefits are (underestimated, overestimated); resources are
(underallocated, overallocated) where positive externalities exist.
• Examples of positive externalities of production are
In the case of public goods (and services), it is impossible to divide the product into individual saleable
units for consumers to purchase and, additionally, the exclusion principle doesn't apply. That is, even if
the product could be sold, consumers would not want to purchase it because "CE
would take advantage of their purchase. People could receive the benefits without paying for the product.
• In such cases, there is no incentive for individuals to purchase the item on their own even though
they may desire the good or service. These are public goods and services and their provision is
made possible through government purchases where tax revenues can be used to provide the
product.
--r_
_)"
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