Answered: 3. Efficiency in the presence of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Efficiency in the presence of externalities

Roses confer many external benefits on society: the beauty they add to a room or garden, the wonderful aroma they give off, and so on. Therefore, the market equilibrium quantity of roses is not equal to the socially optimal quantity. The following graph shows the demand for roses (their private value), the supply of roses (the private cost of producing them), and the social value of roses (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.

Aplia Homework: Chapter 10
3. Efficiency in the presence of externalities
Roses confer many external benefits on society: the beauty they add to a room or garden, the wonderful aroma they give off, and so on. Therefore,
the market equilibrium quantity of roses is not equal to the socially optimal quantity. The following graph shows the demand for roses (their private
value), the supply of roses (the private cost of producing them), and the social value of roses (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.
PRICE OF ROSES
Supply
(Private Cost)
QUANTITY OF ROSES
Social Value
Demand
(Private Value)
Market Equilibrium
Socially Optimal Level
?

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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