Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 16, Problem 1.8P
To determine

What will happen if the production imposes external costs on society, and these costs are not factored into production decisions.

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Define the concept of a negative externality and explain the nature of the negative externality in the fishing markets i.e. describe how the self-interested actions of a fishing company might adversely affect third parties without their consent.
The question is in the screenshots attached. It's part of some practice questions in my online textbook.
The diagram to the right shows the perfectly competitive market for honey. The demand curve shows the marginal benefit to society of consuming an extra unit of honey. The supply curve shows the marginal costs of producing an extra unit of honey. However, suppose that, as a by-product to producing honey, honeybees pollinate flowers, allowing more flowers to grow and bloom. Suppose that for each unit of honey produced, one unit of flowers is also created, providing an external benefit of $6. Use the line drawing tool to draw and label the social marginal cost curve. (Make sure that the curve's one end extends to the output level 18 and it crosses the demand curve.) Carefully follow the instructions above, and only draw the required objects. C Price of Honey ($) 20.00- 18.00- 16.00- 14.00- 12.00- 10.00- 8.00- 6.00- 4.00- 2.00- 0.00- 0 -N 2 4 6 8 10 12 14 Quantity of Honey S = MCp 16 D = MB 18 20
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