4. Externalities - Definition and examplesAn externality arises when a firm or person engages in an activity that affects the well-being of a third party, yet neither pays nor receives anycompensation for that effect. If the impact on the third party is detrimental, it is called aexternality.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 themarket equilibrium price and quantity for this good.Shift one of the curves to reflect the presence of the externality. If there are external costs of production, then you should shift the supply curve toreflect the social costs of producing the good; similarly, if there are external benefits from production, then you should shift the demand curve toreflect the social benefits from consuming the good.PRICE (Dollars per unit)QUANTITY (Units)SupplyDemandDemandSupplyWith this type of externality, in the absence of government intervention, the market equilibrium quantity produced will beefficient quantity.Which of the following generate the type of externality previously described? Check all that apply.than theThe local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents.Nick has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season.A leading software company has decided to increase its research budget for inventing new open-source technologies.Your roommate, Crystal, has bought a cat to which you are allergic.

1. Fill in the blank: If the impact on the third party is detrimental, it is called a "negative"…

With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. than the The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. Nick has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. A leading software company has decided to increase its research budget for inventing new open-source technologies. Your roommate, Crystal, has bought a cat to which you are allergic.

With this type of externality, in the absence of government intervention, the market equilibrium quantity produced will be efficient quantity. Which of the following generate the type of externality previously described? Check all that apply. than the The local airport has doubled the number of runways, causing additional noise pollution for the surrounding residents. Nick has planted several trees in his backyard that increase the beauty of the neighborhood, especially during the fall foliage season. A leading software company has decided to increase its research budget for inventing new open-source technologies. Your roommate, Crystal, has bought a cat to which you are allergic.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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