Question 16 If the mining of gold yields a negative externality, then the social cost curve lies the supply curve, and the socially optimal quantity is than the equilibrium quantity Above, greater Above, less Below, less o Below, greater

Question 16 If the mining of gold yields a negative externality, then the social cost curve lies the supply curve, and the socially optimal quantity is than the equilibrium quantity Above, greater Above, less Below, less o Below, greater

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 2CQQ

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.

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