2. Show on a diagram how a negative external effect can lead to a situation where marginal social cost will exceed marginal private cost at the profit maximising output. Explain briefly how bargaining could lead to an improvement in welfar

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section10.1: Externalities And Market Inefficiency
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2. Show on a diagram how a negative external effect can lead to a situation where marginal social cost will exceed marginal private cost at the profit maximising output. Explain briefly how bargaining could lead to an improvement in welfare.

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