suppose that scientists discover that this particular product has a significant Positive Externality. As we learned in class, the Demand curve is a depiction of marginal private benefit (MPB). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (MSB) is higher than Marginal Private Benefit (MPB). Add this MSB1 to the same graph you created for Question 5. Absent any government intervention, what are the equilibrium price P1, equilibrium quantity Q1, the resulting Consumer Surplus CS1, and the resulting Producer Surplus PS1? Indicate the Socially Optimal output, QSO1. Graphically indicate the size of Dead Weight Loss DWL1 if there is such a loss. In the narrative, please explain how you determined the socially optimal output level and the presence (or absence) of dead-weight loss in this situation. Is the market producing too much, too little, or just the right amount of the product with a positive externality in the absence of government intervention? If an intervention is desirable, give an example of such an intervention and briefly explain it.
suppose that scientists discover that this particular product has a significant Positive Externality. As we learned in class, the Demand curve is a depiction of marginal private benefit (MPB). However, the existence of the positive externality means that for every given output level, Marginal Social Benefit (MSB) is higher than Marginal Private Benefit (MPB).
Add this MSB1 to the same graph you created for Question 5. Absent any government intervention, what are the
Indicate the Socially Optimal output, QSO1. Graphically indicate the size of Dead Weight Loss DWL1 if there is such a loss.
In the narrative, please explain how you determined the socially optimal output level and the presence (or absence) of dead-weight loss in this situation. Is the market producing too much, too little, or just the right amount of the product with a positive externality in the absence of government intervention? If an intervention is desirable, give an example of such an intervention and briefly explain it.
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