Consider the market for tires. Assume that tires exhibit positive externalities. a. Draw a graph of the market for tires, clearly labeling the demand curve, the social-value curve, the supply curve, and the social-cost curve. Note, two of these curves will be the same. b. Clearly label the market equilibrium level of output and the socially optimal level of output. c. Clearly label deadweight loss. d. If the external benefit is $300 per tires, describe a government policy that would yield the optimal quantity.

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