11. Which of these figures portrays the market failure of positive externalities (positive external benefits)? a) Figure A b) Figure B. c) Both Figure And and Figure B d) Neither Figure A nor Figure B e) Cannot tell from the information available.

11. Which of these figures portrays the market failure of positive externalities (positive external benefits)? a) Figure A b) Figure B. c) Both Figure And and Figure B d) Neither Figure A nor Figure B e) Cannot tell from the information available.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.

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