PRICE AND COST I I I I I greater less The market output is greater QUANTITY Demand than the socially optimal output. Demand Supply

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on the
graph reflect the market equilibrium price and quantity for this good.
Suppose that a negative externality arises as a result of the production of this good.
Adjust the following graph by shifting one of the curves to reflect the presence of the negative externality.
PRICE AND COST
greater
less
The market output is greater
QUANTITY
Supply
Demand
than the socially optimal output.
Demand
Supply
(?
Transcribed Image Text:The following graph shows the demand (marginal private benefits) and supply (marginal private costs) curves for a good. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Suppose that a negative externality arises as a result of the production of this good. Adjust the following graph by shifting one of the curves to reflect the presence of the negative externality. PRICE AND COST greater less The market output is greater QUANTITY Supply Demand than the socially optimal output. Demand Supply (?
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