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Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. (? Social Cost PRICE OF AIR HORNS F oudy Supply (Private Cost) Demand (Private Value) QUANTITY OF AIR HORNS +|+| Market Equilibrium Socially Optimal Level C C

Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. (? Social Cost PRICE OF AIR HORNS F oudy Supply (Private Cost) Demand (Private Value) QUANTITY OF AIR HORNS +|+| Market Equilibrium Socially Optimal Level C C

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section: Chapter Questions
Problem 3PA
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Homework (Ch 10) Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. Social Cost Market Equilibrium Socially Optimal Level PRICE OF AIR HORNS 69°F Cloudy Supply (Private Cost) Demand (Private Value) QUANTITY OF AIR HORNS CI
Transcribed Image Text:Homework (Ch 10) Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. Social Cost Market Equilibrium Socially Optimal Level PRICE OF AIR HORNS 69°F Cloudy Supply (Private Cost) Demand (Private Value) QUANTITY OF AIR HORNS CI
3°F 2. Efficiency in the presence of externalities Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. Social Cost Market Equilibrium Socially Optimal Level oudy PRICE OF AIR HORNS Supply (Private Cost) D
Transcribed Image Text:3°F 2. Efficiency in the presence of externalities Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity. Social Cost Market Equilibrium Socially Optimal Level oudy PRICE OF AIR HORNS Supply (Private Cost) D
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