Explain the effect of positive externalities with supply and demand curves.

Question

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Answer 1

Question

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.

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Answer 2

Question

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.

Answer 6

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.

Answer 7

Chapter 7, Problem 1QR

To determine

Explain the effect of positive externalities with supply and demand curves.

Answer 8

Expert Solution & Answer

Explanation of Solution

In a market, if the positive externalities are present, free market will not produce as much of an item as would be socially optimal, as firms do not necessarily include the external benefits they are providing in their decision-making process. Thus, when third parties enjoy the positive externalities, then the market will under-produce.

Figure 1 shows the internal demand, social demand, and internal supply curve as follows:

Principles of Microeconomics California Edition 2nd Edition, Chapter 7, Problem 1QR

From Figure 1, Qs is the social optimal quantity because it includes the external benefits to society and is taken as the total social benefits of consuming.