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ePack: Principles of Microeconomics 6th Edition by Gregory Mankiw
Edition 6ISBN: 978-1133150558ePack: Principles of Microeconomics 6th Edition by Gregory Mankiw
Edition 6ISBN: 978-1133150558 Exercise 3
Consider the market for fire extinguishers.
a. Why might fire extinguishers exhibit positive externalities?
b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.
c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.
d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
a. Why might fire extinguishers exhibit positive externalities?
b. Draw a graph of the market for fire extinguishers, labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve.
c. Indicate the market equilibrium level of output and the efficient level of output. Give an intuitive explanation for why these quantities differ.
d. If the external benefit is $10 per extinguisher, describe a government policy that would yield the efficient outcome.
Explanation
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a)Fire distinguisher yields benefits on ...
ePack: Principles of Microeconomics 6th Edition by Gregory Mankiw
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