Consider the market for fire extinguishers.a. Why might fire extinguishers exhibit positive externalities?b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
Consider the market for fire extinguishers.a. Why might fire extinguishers exhibit positive externalities?b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the market for fire extinguishers.
a. Why might fire extinguishers exhibit positive externalities?
b. Draw a graph of the market for fire extinguishers, labeling the
c. Indicate the
d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
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