Roses confer many external benefits on society: the beauty they add to a room or garden, the wonderful aroma they give off, and so on. Therefore, the market equilibrium quantity of roses is not equal to the socially optimal quantity. The following graph shows the demand for roses (their private value), the supply of roses (the private cost of producing them), and the social value of roses, including both the private value and external benefits 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. Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF ROSES PRICE OF ROSES
Roses confer many external benefits on society: the beauty they add to a room or garden, the wonderful aroma they give off, and so on. Therefore, the market equilibrium quantity of roses is not equal to the socially optimal quantity. The following graph shows the demand for roses (their private value), the supply of roses (the private cost of producing them), and the social value of roses, including both the private value and external benefits 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. Supply (Private Cost) Market Equilibrium Socially Optimal Level Social Value Demand (Private Value) QUANTITY OF ROSES PRICE OF ROSES
Chapter4: Markets In Action
Section: Chapter Questions
Problem 17SQ
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Transcribed Image Text:Roses confer many external benefits on society: the beauty they add to a room or garden, the wonderful aroma they give off, and so on. Therefore,
the market equilibrium quantity of roses is not equal to the socially optimal quantity. The following graph shows the demand for roses (their private
value), the supply of roses (the private cost of producing them), and the social value of roses, including both the private value and external benefits.
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.
Supply
(Private Cost)
Market Equilibrium
Socially Optimal Level
Social Value
Demand
(Private Value)
QUANTITY OF ROSES
PRICE OF ROSES
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