Fire extinguishers exhibit positive externalities because, even though people buy them for their own use, they may prevent fire from damaging the property of others. The following graph shows the market for fire extinguishers. Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference. Price of Fire Extinguishers Supply Demand Quantity of Fire Extinguishers Demand Supply Market QOptimum

Fire extinguishers exhibit positive externalities because, even though people buy them for their own use, they may prevent fire from damaging the property of others. The following graph shows the market for fire extinguishers. Determine whether the private and social values are equal in this case. If they are not, shift the demand curve in the appropriate direction to reflect this difference. Then determine whether the private and social costs are equal in this case. Again, if they are not, shift the supply curve to reflect this difference. Price of Fire Extinguishers Supply Demand Quantity of Fire Extinguishers Demand Supply Market QOptimum

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question 3 Professor Paudel shows the graph for the case of negative externalities in the class. He wants the class to think about positive externalities as well. This got him thinking a lot about potential market failure due to positive production externality in the oil exploration market. Specifically, in his research, he found that expenditures on oil exploration by any company can have a positive externality because they offer more profitable opportunities for other companies. Professor Paudel wants you to enlighten him on the following issues: a) Graphically show private and social marginal cost functions and the demand curve. b) Under positive externalities as mentioned above, is the social marginal cost below than the private marginal cost? Explain and support your answers with the help of a clearly labeled graph. c) Under positive externalities as mentioned above, what's the relationship between social optimum quantity and the competitive market equilibrium quantity? Is there…
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