S. Externalities - Definition and examples An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the Impact on the third party is adverse, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; simiarly, f the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of connuming the good.
S. Externalities - Definition and examples An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any compensation for that effect. If the Impact on the third party is adverse, it is called a externality. The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the market equilibrium price and quantity for this good. Adjust one or both of the curves to reflect the presence of the externality. If the social cost of producing the good is not equal to the private cost, then you should drag the supply curve to reflect the social costs of producing the good; simiarly, f the social value of producing the good is not equal to the private value, then you should drag the demand curve to reflect the social value of connuming the good.
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
Problem 8PA
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![tidterm Exam #2 Alternative
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Keep the Highest 3/4
S. Externalities - Definition and examples
An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any
compensation for that effect. If the Impact on the third party is adverse, it is called a
extemality.
The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the
market equilibrium price and quantity for this good.
Adjust one or both of the curves to reflect the presence of the externality. af the social cost of producing the good is not egual to the private cost, then
you should drag the supply curve to reflecet the social costs of producing the good; simiarly, f the social value of producing the pood is not equal to
the private value, then you should drag the demand curve to reflect the social value of consuming the good.
Supply
Demand
Supply
bemand
PRICE Dalas per unt)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff094666c-1175-4f12-80f0-0eadfc64c067%2F37669d7d-e01c-4769-a34b-af696008d982%2F1sf6dr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:tidterm Exam #2 Alternative
Back to Assignment
Attempts
3.
Keep the Highest 3/4
S. Externalities - Definition and examples
An externality arises when a firm or person engages in an activity that affects the wellbeing of a third party, yet neither pays nor receives any
compensation for that effect. If the Impact on the third party is adverse, it is called a
extemality.
The following graph shows the demand and supply curves for a good with this type of externality. The dashed drop lines on the graph reflect the
market equilibrium price and quantity for this good.
Adjust one or both of the curves to reflect the presence of the externality. af the social cost of producing the good is not egual to the private cost, then
you should drag the supply curve to reflecet the social costs of producing the good; simiarly, f the social value of producing the pood is not equal to
the private value, then you should drag the demand curve to reflect the social value of consuming the good.
Supply
Demand
Supply
bemand
PRICE Dalas per unt)
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