a. Place point A at the equilibirum outcome. Place point B at the socially efficient outcome.Market for house-painting services2,4002,2002,000-Supply1,8001,6004009,200-Marginal social benefit4,000`Marginal private benefit800600400A20020406080100 120 140 160 180 200 220 240Quantity of houses painted (thousands)b. The graph implies that house-painting services produceexternalities. c. Determine the equilibrium price and quantity in this market.equilibrium price: $equilibrium quantity:thousand housesd. Determine the socially efficient price and quantity in this market.socially efficient price: $socially efficient quantity:thousand housese. The market producespainted houses relative to the socially efficient outcome.20,00040,00060,00080.000

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Answered: b. The graph implies that…

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b. The graph implies that house-painting services produce externalities.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 14SQ

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Question

a. Place point A at the equilibirum outcome. Place point B at the socially efficient outcome.
Market for house-painting services
2,400
2,200
2,000
-Supply
1,800
1,600
400
9,200
-Marginal social benefit
4,000
`Marginal private benefit
800
600
400
A
200
20
40
60
80
100 120 140 160 180 200 220 240
Quantity of houses painted (thousands)
b. The graph implies that house-painting services produce
externalities.

c. Determine the equilibrium price and quantity in this market.
equilibrium price: $
equilibrium quantity:
thousand houses
d. Determine the socially efficient price and quantity in this market.
socially efficient price: $
socially efficient quantity:
thousand houses
e. The market produces
painted houses relative to the socially efficient outcome.
20,000
40,000
60,000
80.000

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Follow-up Question

c. Determine the equilibrium price and quantity in this market.
equilibrium price: $
d. Determine the socially efficient price and quantity in this market.
socially efficient price: $
equilibrium quantity:
e. The market produces
socially efficient quantity:
thousand houses
thousand houses
painted houses relative to the socially efficient outcome.

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