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, including both 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.****Graph Explanation:**- **Y-Axis:** Price of Roses- **X-Axis:** Quantity of Roses- **Supply Curve (Private Cost):** This is depicted as an upward-sloping line, indicating that as the price increases, the quantity supplied increases.- **Demand Curve (Private Value):** This is depicted as a downward-sloping line, showing that as the price decreases, the quantity demanded increases.- **Social Value Curve:** This curve lies above the demand curve, representing the additional social benefits of roses beyond their private value.- **Market Equilibrium:** Shown by a black plus symbol where the supply and demand curves intersect, indicating the quantity and price determined by the private market.- **Socially Optimal Level:** Indicated by a purple diamond symbol where the social value curve intersects the supply curve, representing the ideal quantity and price considering external benefits.

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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, including both 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. Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF ROSES PRICE OF ROSES

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, including both 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. Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF ROSES PRICE OF ROSES

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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